Is the U.S. Economy in Trouble?
The growing debt/GDP ratio is not a good sign. (for more, see Kip Esquire)
I am not terribly optimistic that future output growth rates will exceed future debt growth rates, especially if all the "off-budget" items, such as social security, are included as part of the debt.
The debt-to-GDP ratio is currently rising — and this "inherently unstable situation" is occurring in a "Goldilocks economy" where inflation and unemployment are relatively low and general economic conditions are optimal. If the economy slows down, let alone goes into recession, the debt-to-GDP ratio will almost certainly skyrocket and then things will really become "inherently unstable."There is good reason for concern if the decline in the savings ratio over the past five years has been the result of re-mortgaging and loose mortgages and low interest rates.
I am not terribly optimistic that future output growth rates will exceed future debt growth rates, especially if all the "off-budget" items, such as social security, are included as part of the debt.
Category: Economics Posted on
Tuesday, February 21, 2006 at 12:25am
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