Jamie Galbarith and the Infinite Fed Put

Jamie posits a debt to gdp equation with some missing variables:

Δd = –s + d * [(r – g)/(1 + g)]

The decrease in debt occurs mainly because the Fed allows negative real rates, gdp growing faster than borrowing costs. The borrowing cost, r, the real rate we pay for debt:

(r - g). 

If the Fed made real rates negative ( inflation greater than nominal interest rates) then debt/GDP will reduce over time. Who defined this equation?

In a 2010 paper for Citigroup, the economist
(and former Bank of England adviser) Willem Buiter spelled
out the arithmetic of a rising debt-to-GDP ratio.

In other words, if the Fed could just get bondholders to agree to lose money for 50 years, problem solved!  But that's the missing variable, the police cost of enforcing such a bizarre capital control. How can Citicorp security guards force OPEC to accept indefinite losses? They can't, ultimately they rely on the very expensive US military machine to enforce capital controls.

Galbtraith and Buiter and simply inviting a middle east war when OPEC refuses to take losses on behalf of Citicorp.