Re:The Economy
by nhaehnle on Tuesday July 01, 2014 @04:18AM
(#7969637)
Ah, right. I still think there are two mitigating factors here to what I said.
First: In the stagflation of the 1970s (which is really the only significant empirical data point we can draw from), increased interest rates were a political choice made by the central bank rather than an economic necessity.
Second, and more importantly: Stagflation is characterized by inflation, which means that nominal GDP grows even while real GDP is stagnating.
Since real GDP is irrelevant to the debt-to-GDP ratio (witness the debt-to-GDP ratio through the 1970s), the conclusions for whether one should worry about the debt-to-GDP ratio remains the same as far as I can tell.
First: In the stagflation of the 1970s (which is really the only significant empirical data point we can draw from), increased interest rates were a political choice made by the central bank rather than an economic necessity.
Second, and more importantly: Stagflation is characterized by inflation, which means that nominal GDP grows even while real GDP is stagnating.
Since real GDP is irrelevant to the debt-to-GDP ratio (witness the debt-to-GDP ratio through the 1970s), the conclusions for whether one should worry about the debt-to-GDP ratio remains the same as far as I can tell.