R&R defend themselves (again)

R&R are still on the defensive. Another instance of economic discussion going off course.

The recent debate about the global economy has taken a distressingly simplistic turn. Some now argue that just because one cannot definitely prove very high debt is bad for growth (though the weight of the results still say it is), then high debt is not a problem.

No doubt. But that´s the sort of thing you brought on when you said that 90% debt ratio was a ‘tipping-point’!

The debate needs to be reconnected to the facts.

Let us start with one: the ratios of debt to gross domestic product are at historically high levels in many countries, many rising above previous wartime peaks.

Yes, but if you look at this Eurozone Debt – NGDP chart you´ll see that the culprit for the crisis was not the debt ratio but the complete failure of monetary policy that allowed nominal spending to crash.

Three coins in the fountain_1

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