Wednesday, October 30, 2013

Yes debt matters

Interest expenses go up very fast with excessive debt
The chart contains interest payments by DC as a percent of GDP and DC debt as a percent of GDP.  We cannot grow for if we did the interest payments would jump. It was 5% of GDP under Reagan with total debt 30% of GDP.  Debt is now three times GDP, the potential cost of interest payments under growth is now at 10%.    Thus, politicians will bear the brunt of the chaos caused by rapid growth, they will be required to extract an additional 7% of GDP and cause a recession.  We are stuck at 1.6 real growth rate.   I blame California politicians for the disaster.

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