Sunday, March 27, 2011

Worth repeating

From Federal Debt As a Percentage of GDP by Thomas Charles, Demand Media:

Low Effects

The economic history of the United States shows there is not a direct correlation between low or falling debt to GDP percentages and strong, long term economic times. The federal debt percentages of GDP for 1835 to 1837 were zero, zero, and 0.02, respectively. The Panic of 1837 led to a depression with effects that lasted until 1843. Prior to the Great Depression, the debt as a percentage of GDP figure fell 10 straight years, from 34.98 percent in 1919 to 16.34 percent in 1929.

High Effects

Just as low or falling debt to GDP figures do not guarantee prosperous economic conditions, high levels of federal debt compared to GDP do not necessarily signal future severe economic times. From 1945 to 1947, each year's federal debt exceeded more than 100 percent of GDP. While the debt to GDP percentage fell beginning in 1946, it was still at 54.39 percent in 1960. The post-war years of Harry Truman and Dwight Eisenhower are seen as a period of massive economic expansion, with GDP more than doubling during this time.

Highlighting added.

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