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As John Taylor points out, our debt situation today is much scarier than it was after World War II. When the war ended, we stopped accruing war debt. As GDP grew, the ratio of debt to GDP shrank. I would describe our current debt not as war debt but as entitlement debt. Entitlement debt is not frozen. It is growing. It is growing faster than GDP. Very different.
Thanks to Russ Roberts for pointing out John Taylor’s new blog. Of course, I will be disputing Taylor’s monetarism. Taylor is one of those in the “monetary shocks” column of my table classifying various macroeconomists.
READER COMMENTS
Lord
Sep 23 2009 at 11:28pm
The problem is the dollar is not just US currency anymore but world currency. With world population ageing and peaking, it will need much more debt to provide saving vehicles to those who will no longer be working in the future. This is the retirement plan of China, Japan, Europe, etc. They will want to collect eventually and will have to do so by buying from us or lose in exchange. This is our future work. The exchange rate will prevent it from ever becoming too onerous.
Ed Hanson
Sep 24 2009 at 11:02am
I suspect it is in the works, but if not, I suggest that the EconLib webmaster be contacted to include Taylor’s new blog on the right hand side list of links.
Ed
[Done. It wasn’t in the works, but it probably would have been shortly.–Econlib Editor]
George
Sep 27 2009 at 2:57pm
Maybe we could cut and run from the War on Poverty?
I mean, we’ve had a number of surges, and we’re still getting our butts kicked by Poverty. It doesn’t help that Poverty’s in league with Drugs, making it a two-front war….
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