Prior to 2001, I supported a much smaller government, but I wasn’t particularly obsessed about government debt per se. I didn’t think that government borrowing was stealing from future generations (the technology for stealing from future generations more or less eludes us). And government borrowing has some benefits versus raising taxes. If you are paying a high interest rate on your personal debt, then deferring taxes effectively allows you to borrow at the government’s lower rate. Those who are afraid of higher taxes tomorrow can save more today (perhaps by buying government debt). Even in a world with government borrowing, those individuals who save for the future will inherit the Earth.

However, I came to fear high levels of government debt after reading an article by Paul Krugman. With the passing years, I found it rather interesting to owe this particular fear to Krugman. He is not best known for stoking hysteria over the government debt. For this reason, I thought it would be interesting to track down the article that had dramatically changed my views. In 2001, Paul Krugman wrote a piece called Reckonings; A Latin Tragedy that described the financial situation in Argentina. These are the sections that influenced my thinking.

But last week the Argentine government found that it could roll over short-term debt only by offering a 14 percent interest rate, five points higher than a month earlier. And the buzz on Wall Street is that the question about an eventual Argentine debt default is no longer whether, but when.

Both the markets and the Argentine government are treating the issue as mainly one of deficit spending. Indeed, in a desperate effort to regain market confidence, President Fernando de la Rúa has called for draconian spending cuts.

Interesting, but so far nothing that would radically alter my worldview. Profligate spenders reap what they sow, right? But …

First, a word about the dire budget numbers you may have heard. Argentina, we are told, has a public debt equal to 45 percent of its G.D.P.; it has a budget deficit of more than 2 percent of G.D.P. Gee — the budget numbers are almost as bad as they were in the United States when the elder George Bush was president!

Why does a level of debt and deficits that caused only tut-tutting here create panic in Argentina? To some extent it’s a vicious circle: because investors believe default is likely, they demand usurious interest rates that may well push the country into default.

What constitutes a reasonable debt level is determined in part by what financial markets think constitutes a reasonable debt level. If your debtors don’t think you can repay your debts, the resulting higher interest rates can be a self-fulfilling prophecy. Prudence might suggest that governments temper how much debt it piles on during periods of low interest rates; financial markets are stable until they are not.