[FoRK] Really scary graph of the day

Gordon Mohr gojomo at usa.net
Mon Feb 9 20:13:44 PST 2004

Russell Turpin wrote:
> Click the link:
> http://www.pimco.com/NR/rdonlyres/72E4EAA9-0BA2-4880-9A29-2D4F0D8142B7/1162/total.gif 
> That puts to picture a broad impression that
> consumers, homeowners, businesses, and
> governments are all up to the gills in debt.
> It's hard to believe either that we'll stay
> at such a high level, or that the slide down
> will be easy.

To be the devil's advocate for a bit...

How much debt is too much? How do you know? It's not
the case that less debt is always better: there's some
optimal level.

How does this compare to other countries?

Since every dollar owed is also a dollar due for someone
else, "net debt" worldwide is always zero. Who holds all
this debt -- the same persons and organizations racking
up debt in other markets? Isn't this statistic masking out
the other side of the equation?

What is debt as a % of all assets, rather than % of
income? Is that at a centurylong high, or just middling?

Does it seem that outlandish for a person with a
$100K income to have a $300K mortgage? Aren't the person's
other assets, and the reasonably-expected aftertax
gains on the mortgaged property (and cost of the loan)
the key factors? Why then couldn't a national debt at 300%
of national income be reasonable?

Wouldn't each of the following make the use of debt
relatively more attractive...
   - a stable international economic environment
   - a stable political environment
   - accelerating productivity
   - low interest rates
   - lower transaction costs
   - technological innovation in financial instruments

Haven't we been seeing all of these for a decade-plus?

- Gordon

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