They had bad burn rate in the Gold Rush. A very bad burn rate.

Who s Afraid of the Big Bad Debt?

It wasn't too bad, but they're driven to produce these things at an incredible rate.

Some countries face the growing risk of near perpetual belt tightening, which would further dampen growth and thus keep debt ratios high. After all, if a country s debt GDP ratio is to decline without austerity, the interest rate that it pays on its debt must be lower than its GDP growth rate.

Another major risk of interest rate liberalization in China stems from rising public debt, particularly local government debt, which has grown significantly in the wake of the global financial crisis. A key parameter for determining the long run sustainability of public debt is the gap between interest rates and the nominal GDP growth rate.

How much government debt is too much is an open question, because tolerance for public debt is highly dependent on prevailing perceptions. The risk premium attached to the interest rate is the critical variable once it starts rising, the existing rate of deficit financing becomes unsustainable.

Moreover, a debt reduction in the form of further interest rate reductions and maturity extensions on foreign government held debt would not hurt financial markets. But debt held by the European Central Bank and the IMF could pose a problem.

The demand for debt repayment confronts the philosophy of debt forgiveness. In the lender s view, the 17 interest rate that Greece s government now has to pay for its 10 year bonds accurately reflects the lender s risk in buying Greek government debt.

Moreover, in a normal situation, governments even the US government and those in Western Europe cannot run up the national debt and still pay a real interest rate of 1 , or even 3 . Normally, the math of increasing government purchases tells us that a small or dubious boost to output today brings a heavier financing burden in the future, which makes debt financed fiscal expansion a bad idea.

Bad statements are for bad people (or bad women for bad men) and bad people for bad statements (or bad men for bad women).

Bad statements are for bad people (or bad women for bad men) and bad people for bad statements (or bad men for bad women).

And you know, without the smell that would have accompanied that, we had the same thing on the Internet very bad burn rate calculations.

In East Asia debt stock increased by a modest rate of 2 per cent and in South Asia by 1 per cent.

Poverty increased, the currency suffered repeated devaluations, foreign and domestic debt registered an increase and the growth rate of the economy fell.

An increase in the corporate tax rate appeals to many US voters who believe that corporations are not paying their fair share of taxes and are worried about widening income inequality. But, in a world of mobile capital, raising the corporate tax rate or simply leaving it at its current level would be a bad way to generate revenue, a bad way to increase the tax system s progressivity, and a bad way to help American workers.

It can also provide technical expertise to Arab policymakers on debt management. Without first rate expertise in debt management, an economy implementing large scale public outlays risks crowding out private investment through overreliance on domestic savings.

This instability also makes it difficult to address other grave problems affecting the global financial system. Sovereign debt, needed by all countries, but particularly by the poorest, suffers profoundly from erratic interest rate and exchange rate movements.

Bad Pentagon, bad!

In early 2013, the government was forced to announce a 32 devaluation, and stopped issuing government debt in dollars. The issuance of dollar bonds was a major source of abuse, with speculators buying dollar debt at the official exchange rate, selling it for greenbacks, and then exchanging them for bolivars at a much higher rate on the black market.

For countries seeking re entry into international financial markets after the debt crisis, higher real interest rates and a stable exchange rate were prerequisites.

The conclusion is clear Greece s debt service burden is too large, and it must be reduced. This can be accomplished in two ways sharply cutting the interest rate paid by Greece, or reducing the face value of the debt.

Meanwhile, Western central banks are using another kind of financial repression by maintaining negative real interest rates (yielding less than the rate of inflation), which enables them to service their debt for free. The European Central Bank s policy rate stands at 0.75 , while the eurozone s annual inflation rate is 2.5 .

That does not mean that the US should maintain the discount rate close to zero and run up government debt indefinitely. Once the economy starts growing again, interest rates will rise perhaps precipitously, if the accumulated debt is too large.

Bad bear, bad bear! Voom!

Rain. Not bad. Not bad.

Proponents of the financial repression explanation essentially view low interest rates as a hidden tax on bondholders, who receive a lower interest rate than they would otherwise. This is not necessarily a bad thing, given that all taxes are distorting, and that there really is no way to deal with today's outsize debt burdens that does not impinge on growth in some way.

Fourth, the spirit of the Maastricht rule on public debt would be reinforced, and moral hazard would be reduced. After all, the program would boost significantly the interest rate spread between Maastricht compliant debt and the debt that remains in the member states hands (which they previously were not permitted to accumulate).

As Daniel Gros recently pointed out, debt that can be rolled over indefinitely at zero interest rates is no debt at all. This is an extreme example but the closer a fixed interest rate gets to zero, and the longer the maturity becomes, the lower the burden of the stock of debt.

The inflation pessimists worry that the government will actually choose a policy of faster price growth to reduce the real value of the government debt. But such a strategy can work only in countries where the duration of the government s debt is long and the interest rate on that debt is fixed.

After three months, it became evident that Kondo Inc. could not repay the debt (informants or whistle blowers, assuming that the bad loan contract was reported by a bank employee).

ERW bad luck or bad intent

Plunging debt service is largely an outgrowth of the Fed s unprecedented zero interest rate policy. As long as the stock of debt remains excessive, consumers will dismiss the reduction in interest expenses as nothing more than a temporary subsidy from the Fed.

First, as Lee Buchheit, the attorney who oversaw the Greek private restructuring, has proposed, maturities on official Greek debt could be greatly extended. A simple structure would be to make all debt payable over 40 years, carrying an interest rate of 2 .

Even more fundamental arithmetic lies at the core of the debt quandary. The tax rate required to fund social welfare benefits depends on three factors the dependency ratio (the ratio of recipients to taxpayers) the replacement rate (the ratio of benefits to average wages) and the economic growth rate (roughly, productivity plus population growth).

Although it is difficult to anticipate how high long term interest rates will eventually rise, the large budget deficit and the rising level of the national debt suggest that the real rate will be higher than 2 . A higher rate of expected inflation would also cause the total nominal rate to be greater than 5 .

But cheap credit promotes bad investment and excessive debt, which borrowers often are unable to repay. More fundamentally, investment is a bet that cannot pay off if growth is structurally depressed.

Notwithstanding sharp reductions in debt service traceable to the Fed s zero interest rate subsidy, the stock of debt is still about 116 of disposable personal income, well above the 43 average in the final three decades of the twentieth century. Similarly, the personal saving rate, at 4.25 in the first half of 2013, is less than half the 9.3 norm over the 1970 1999 period.

In issuing contingent capital, banks would have to pay a higher interest rate than they would on ordinary long term debt, because debt investors will face the true cost of capital, not the government subsidized cost. Over time, however, the interest rate premium is likely to be small, because higher capital requirements and contingent capital should significantly reduce the likelihood of ever reaching the triggers.

The difference reflects a combination of the lower rate on short term debt and the highly favorable terms on which Greece is now able to borrow from official lenders at the IMF and the ECB. If Greece had to borrow at the market interest rate on ten year bonds, its deficit would rise by 6.5 of the Greek government debt or 11 of GDP.

If your debt becomes unsustainable because you borrowed too much to take long vacations or buy expensive appliances, your bad behavior is to blame. The same applies to corporate firms some have bad luck and their business plans fail, while others borrow too much to pay their mediocre managers excessively.

Interest rate spreads on Italian sovereign debt have widened, but not sharply. External investors may not be rushing for the exits, but they are not piling in, either.

To believe that any country issuing debt in its own currency is risk free as long as the exchange rate is flexible is astonishingly naive. For one thing, there is still inflation risk, particularly for countries with weak fiscal institutions and heavy debt burdens.

Deflation increases the real (inflation adjusted) debt burden, as well as the real interest rate. Though there is little evidence of the importance of small changes in real interest rates, the effect of even mild deflation on real debt, year after year, can be significant.

For Greece, with an overall deficit of 4.1 of GDP and a debt GDP ratio of 170 , the debt ratio would fall if the combination of inflation and real (inflation adjusted) GDP growth exceeded 2.4 . Stated differently, now that Greece has achieved a zero primary budget deficit, its debt burden will decline if its nominal growth rate exceeds the average interest that it pays on its government debt.

Not bad, not bad. No serious injuries so far.