OpEdNews Op Eds

Debt Deal Delusions: Debt to Gross Domestic Product Ratio

By (about the author)     Permalink       (Page 2 of 2 pages)
Related Topic(s): ; ; ; ; ; ; , Add Tags Add to My Group(s)

Valuable 5   Must Read 4   Well Said 4  
View Ratings | Rate It

opednews.com Headlined to H2 8/3/11

Become a Fan
  (118 fans)
- Advertisement -

" Reinhart and Rogoff picked the 90% figure almost arbitrarily. They chose, without explanation, to divide debt-to-GDP ratios into the following categories: under 30%, 30-60%, 60-90%, and over 90%. And it turns out that growth rates decline in all of these categories as the debt-to-GDP ratio increases, only somewhat more in the last category."  Robert Shiller, Delusions and Debt  July 21

So we've had a debt crisis based, in large part, on a study that reversed causality,  picked an arbitrary unit of time (one year) for the ratio used, and created arbitrary categories, including the magic 90% and above danger zone, where there were the differences in declining growth were not that remarkable.  The reversed cause and effect mistake is enough to throw the entire theory out.

But if Professor Shiller's erudite analysis doesn't satisfy you, here's one more reason to reject the debt ratio argument.  It excludes manipulation and bad judgment.

The study by Reinhart and Rogoff notes the following countries as having the worst Debt-to-GDP ratios.  Shiller pointed out that the measure isn't the cause of the crisis rather, the crisis causes the ratio.  In practical terms, fixing the ratio is not guaranteed to fix the underlying causes of the economic crisis.

A variation of the causality critique is obvious.   Iceland, Ireland, and Spain were subject to various manipulations by internal and international finance.  The governments of the UK and US were subject to and enablers of the same manipulations.  The variable that's missing is outside manipulation and government complicity in that manipulation.  Absent the machinations of Wall Street and the City of London, would any of these countries have the same Debt-to-GDP ratios?

- Advertisement -

Those brave enough to watch on C-Span have endured the ranting and fulminations of a bunch of male hysterics.  So sure of themselves, so expert at everything, so willing to take the country down as low as it can go economically -- all for a set of cherished assumptions.  This is one of them.  We should thank Robert J. Shiller for calling it what is -- a delusion.


This article may be reproduced with attribution of authorship and a link to this article.

The Money Party RSS

- Advertisement -

Next Page  1  |  2



The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Follow Me on Twitter

Contact Author Contact Editor View Authors' Articles
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Ukraine President Once Agent for U.S. State Department

Worst President Ever - Barack H. Obama

It's official! You're on your own

Rigged Elections for Romney?

Real Unemployment at 23% - Dampening the Excitement

Humiliation And Death As A Tool Of National Policy


The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
6 people are discussing this page, with 11 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)
It has been reported for weeks in the alternative ... by David Ruhlen on Wednesday, Aug 3, 2011 at 9:55:40 AM
Fabricated from fiction, fact-free, fantasies.&nbs... by Michael Collins on Wednesday, Aug 3, 2011 at 9:35:33 PM
which is distinct from socialism, Marxism and comm... by bogi666 on Thursday, Aug 4, 2011 at 1:54:50 AM
sociopathic-psychopathology........the super-congr... by Working-class UK Socialist on Friday, Aug 5, 2011 at 1:08:01 AM
Bonfires are mesmerizing. What is it about fire? ... by Ned Lud on Wednesday, Aug 3, 2011 at 10:01:27 AM
The spin masters fired up the might Whurlitzer dec... by Michael Collins on Wednesday, Aug 3, 2011 at 9:38:34 PM
Does nobody understand that the only two things th... by granddad on Wednesday, Aug 3, 2011 at 1:35:44 PM
Just two sentences - what on earth is he saying? ... by Working-class UK Socialist on Wednesday, Aug 3, 2011 at 9:15:01 PM
When your economy hits the skids, your debt tends ... by Michael Collins on Wednesday, Aug 3, 2011 at 9:42:46 PM
 I suspected that was the gist of it.  I... by Working-class UK Socialist on Thursday, Aug 4, 2011 at 4:24:36 PM
for political purposes. Using the accumulated debt... by bogi666 on Thursday, Aug 4, 2011 at 1:45:59 AM