Wednesday, November 23, 2011

The Debt Nuke and When It Detonates

Nice, short summary:

When does debt go from good to bad? We address this question using a new dataset that includes the level of government, non-financial corporate and household debt in 18 OECD countries from 1980 to 2010. Our results support the view that, beyond a certain level, debt is a drag on growth. For government debt, the threshold is around 85% of GDP. 

Great.  According to this source, we're WAY past 85%.

HT:  Peter


steveegg said...

The cherry bomb on that "frosted" crap cake - earlier today, Germany couldn't sell over a third of its scheduled 10-year bonds (of course, they weren't willing to part with more han a 2% nominal interest rate and a 1.98% yield).

J. Strupp said...

ECB could buy them up.....but they won't.

steveegg said...

Because overtly soaking up the debt would be an admission the Euro is a miserable failure (never mind it already is a miserable failure).

J. Strupp said...

Then liquidate.

The Germans take massive losses in their banking system as periphery nations devalue and readjust their trade imbalances while exiting the Euro which should put a few million Germans out of work in the process over the next couple of years

That's a choice.