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Why will high Debt-to-GDP or government spending send the economy into a recession? Do you agree that it is a problem at some point? If so then why not at cur
by richcollins 12y ago
Why will high Debt-to-GDP or government spending send the economy into a recession?
Do you agree that it is a problem at some point? If so then why not at current levels?
- epicureanideal 12y agoIf you think about this in a more general context it's easier to see that "Debt-to-GDP" ratio alone isn't enough to determine that there is a problem. You need a combination of debt level and interest rate. For example, I personally could have $100 Trillion in debt but with an infinitesimally small interest rate and an infinitely long repayment period, I would not be concerned. What matters is Debt-Payment-to-GDP ratio. There is certainly some level of that ratio at which I would be concerned.
- nhaehnle 12y agoStill, there hasn't actually been any argument as to why a high debt-whatever-to-GDP ratio would cause a recession. I would actually argue the opposite: If debt payments suddenly increased, this would infuse cash into the economy which would likely boost GDP.