Debt to GDP Ratios source: This Time is Different. This statistic is for total government debt (domestic + external)
IMF Data dissemination
Historical Debt using Current Public Sector Debt to GDP
These Graphs Pose An Interesting Question – How did we recover from these record debt levels?
It usually involves a combination of inflation (1820s + 1914-18) devaluation or economic growth (e.g. UK in 1950s and 1960s.)
Lessons from This Time is Different
- Sovereign Debt Default crisis followed by hyper inflation were quite common in the past – but less so recently.
- Banking crisis are frequent and when they occur they tend to be devastating for government finances (on average government debt rises by 86 per cent during the three years following a banking crisis) and the economy in general.
- Certain factors make financial crisis more likely – loose regulation, asset bubbles, current account deficits, excess confidence.
- In a boom, it is easy for those involved to wave away warning signs and past lessons of history.
- There is no guarantee banking crisis won’t return to harm us in the long term.
– This time will be different at Amazon.co.uk