Quote:
Originally posted by wig@Jul 2 2003, 05:18 PM
Is the measurement of debt to GDP the correct benchmark?
|
I think so. The size of one's debt (whether individual, company or nation) is irrelevant without some benchmark. One might compare to GDP, GNP, income taxes paid or any other such figure but those numbers are going to be correlated somewhat anyway. Since the debt to GDP ratio for the US, Canada, Germany, France, and Japan are similar to the US one thing is for certain is that the major economies of the world all have similar views of what is acceptable or not acceptable regarding debt to size of economy. If one falls they probably all fall. What would happen though in worst case scenario. Is there much of a possibility of a recession-like event lasting longer than a decade? Probably not.
What would monetary policy look like on the other side? The result of the depression was the monetary/economic policies of Keynes and his followers, the same policies that some people today really have a problem with. They have been extremely successful though in their goal of smaller, less frequent recessions. I've never heard a better proposal and so on we go. Increase government spending and tax cuts during recessions is the order of the day.