Tuesday, January 17, 2012

Debt to GDP Ratio

Often pundits will say that our current debt to GDP ratio is not unreasonable because it is not too high relative to the period following the WWII and the Great Depression.

It is true that during the post WWII era, government spending exceeded GDP. Nevermind that FDR’s New Deal actually prolonged the Great Depression. And ignore the fact that despite conventional wisdom, World War II did nothing to create prosperity. As Bob Higgs has argued extensively, no amount of money pumped into a depressed economy can bring about genuine economic recovery unless investors and business leaders feel secure in their property rights.


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