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| Les Cargill wrote:
> tonyp wrote:
>
>
> Bonds. Funny fiat non-money, then. Interestingly, if you take two
> things, very simple ( so probably over-simple ) things:
>
> 1) @ 3% annual growth over (2006-1946) = 60 years, you get
> roughly 6. 5.89 . Sixfold increase in GDP ( really?? Seems a
> lot???).
GDP 1945: $223 billion
GDP 2005: $12,456 billion
Annual average growth rate ~7%
You are using real GDP, but when deflating for debt you should be using
nominal GDP. Yes, a dollar is worth less today than it was in 1945 but
this affects the value of our dollar-denominated debt just as much as
it affects the value of our dollar-denominated GDP.
> 2) The WWII debt went from 110% to *10%* of GDP. Against
> a GDP increase of 589%. 110/5.89 = 18.7%. 10/18.7 = 53.4%.
>
> So it's 46.6% paid off, then? On a pure linear amort
> schedule, that's a payoff basis of about 128 years.
I maintain that it isn't "paid off" at all. We have barely run any
surpluses during the interim and all that has really happened is that
the debt has become far, far more manageable because economic growth
has outpaced interest rates on treasuries. This just demonstrates why
you can indeed, if necessary, run deficits indefinitely. Obviously you
can since the US had done so for over 60 years and investors still
consider US treasuries to be risk free.
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