Swapping Debt

TW: Have posted about debt from some different angles. The need for government spending to support the economy amidst the great demand contraction (otherwise demand completely collapses) and the need for the U.S. generally to reduce its debts in the long-term both public and private held. This graph shows the magnitudes of the various debt levels. Private debts of all kinds have soared over the past 50 years generally and past 25 years particularly as a % of GDP.

These debt levels could not continue unabated and will likely need to recede. Public debt as a % of GDP has been up and down (as one would expect amidst varying economic climates) but in total was not unusually high at the beginning of the most recent contraction.

Two points government debt acts as a stabilizer on the overall economy it should rise during contractions to smooth the economic impact of private demand collapse. Two those freaking out about the "Chinese buying all of our debt" must realize if private debt is starting to contract even if public debt increases the net total debt may not rise in fact it may go down. Things to keep in mind as the demagoguery continues from some on the right.