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Thanx for this. I am pleased you chose the ratio of debt to gross domestic product since this is the measure I am most familiar with. But I wonder about its analytic purity since it compares a measure of capital with a measure of recurrent production. Would an analytically purer measure be debt interest payments per gross domestic product?

Good question Gavin. Certainly a good alternate measure to consider if you are concerned about stock/flow comparisons. Still, we make debt/GDP comparisons all the time whether it is public debt or even household debt levels and helps us visualize what the amount of current output a stock of debt represents.

Of course, another way to look at this data would be to look at the change in the debt to GDP ratio from the start of a President's term to the end to measure the increase/decrease under their watch. After all, when a President takes office, they do inherit the debt to date. I guess that is work for another time...

Denmark: Welfare State with no natural resources. Debt to GDP Ratio 2017: 36.4%
Canada: Rich in natural resources yet lots of poverty and urban decay. Debt to GDP Ratio 2017: 89.60%

What the heck is going on, someone please explain.

As for the USA, is there a clear correlation between rate of increase debt and the invention and growth of entitlements (starting with agricultural entitlements in 19th century).

Congress has the purse strings, not the President. Because of a general consensus that a "line item veto" is unconstitutional, all the President can do is slam the government shutdown button, which (surprisingly) doesn't save money anyway; the workers all get back pay.

Any Congress could cut spending if they wanted to ... they simply need to agree on which government programs are not important. Sadly, there isn't a lot of incentive to bring government debt under control ... only a small fraction of voters care (those Tea Party weirdos) and as a "last resort" the government bonds end up at the Fed where the debt gets monetized (shhh, don't say money printing). The difference typically washes through into price inflation, but that takes a while, and we can argue about who genuinely pays for that. If you can keep your wealth in assets, have a regular stream of income, and you can achieve pay rises now and then ... price inflation isn't such an issue.

On the other hand if you are on a tight budget, trying to save money in a bank account, and your income is haphazard so you don't qualify for a loan ... then price inflation is one of worst things that can happen.

Bigger question is if we have more private debt than ever. $27 trillion? How will people ever pay it back? Why isn't private debt ever part of the discussion?

Isn't private debt a problem only if it is unlikely to be repaid? If a company borrows to invest in new plant isn't that good debt? If a person borrows to pay 80% of the price of a residential property isn't that safe debt?

Gavin, is it safer than federal debt?

I think lenders charge most private debt higher interest than most sovereign debt and so consider it less safe than public debt. But debt that is secured by assets is safe and therefore on its face unproblematic whether it is incurred by a public or private body.

Peter, I think Denmark runs a trade surplus, Canada a deficit.

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