Wednesday, January 1, 2014
More government debt and reduced growth go together
Says Owen Zidar.
He shows two graphs, one for high (red) and one for low government debt (blue) countries. The X axis is forward growth, the blue curve, shifted right, has more growth. We find the expected result, with lower debt the blue line shifts right, It looks like doubling your debt matches 1.5 points of lower growth. Did we just now double our debt? Yes we did, and Congress intends to increase debt.
So why are we increasing our debt? Because we expect lower growth in the future? Growth clocked in a 4.1% increase last quarter. Since Congress intends to dump another 4% of GDP on the debt market, Congress must be expecting a slow down next quarter? Either Congress knows something we do not, or Congress is itself the cause of lower growth by way of the debt machine.
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