Re: generational accounting/kotlikoff

[ACSLKS@xxxxxxxxxxxxxxxx id <01HMM16PCAXW8Y5PJI@xxxxxxxxxxxxxxxx>; Fri, 03 Feb 1995 11:56:18 -0400 (EDT)]

> At 1:07 PM 2/2/95, Randy Wray wrote:
>
> >Yes, this book by kotlifkoff is exactly the sort of nonsense to which
> >I refered. Look, what sort of irrational expectations would lead
> >anyone to believe that the gov'ts debt should, will, could be every
> >paid off? Sorry for the brevity and typos--I have to ftp thru Univ of
> >Bo, then telnet to Denver, so editing is difficult and glitches are
> >common. Randy Wray
>


and D. Henwood inquired:


> What if debt service takes an ever-growing share of your income? Does that
> matter?
>
> Doug
>
> --
>
> Doug Henwood
> [dhenwood@xxxxxxxxx]
> Left Business Observer
> 250 W 85 St
> New York NY 10024-3217
> USA
> 212-874-4020 voice
> 212-874-3137 fax
>
>

The debt relative to GNP matters because it affects the liquidity position of
the economy.  But probably of greater importance is the interest service
required.  I have not looked at it lately, but the ratio of interest payments
to GNP declined after a WWII peak, and has risen ever since.  Of course, this
reflects not only rising interest rates, but the short-term nature of the debt.

Lonnie K. Stevans