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Politics : Formerly About Advanced Micro Devices
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To: Taro who wrote (251999)9/19/2005 8:46:01 PM
From: combjelly  Read Replies (1) of 1572088
 
"US pro capita national debt is still 20% below Germany and 55% below Japan. "

Perr capita debt isn't the relevant figure, the total is. The reason why the total is important is that the debt has to be carried by someone, either domestically or foreign. If those bonds can't be sold, and there are signs that they are meeting resistance, then the rates have to be raised to attract buyers. At some point, the government bonds have a higher rate than business bonds, and the businesses can't raise money to fund expansion and other things. So the country takes a hit on productivity. When productivity takes a hit, wages stagnate and eventually unemployment starts to climb. At some later point, they can't sell the government bonds they need and then they just start printing money to cover the deficit. And that leads to inflation.

This, by they way, isn't some theoretical economics model. It is what happened in the US during the late 1960s through the early 1980s.
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