In a comment to a post of Brad Setser's, DF challenges (perhaps rhetorically), "What is 'too high'? [Debt-to-GDP is] now 'higher' than in 1929... Let us know, if you have a solution to keep the debt level in a permanent high plateau, or have the debt rise forever, or reduce debt level without any harm for the economy."

I'm glad to oblige:

Sequester the debt. Let it be purchased by entities that are willing to roll it over forever, that will absolutely never sell or demand cash for the debt that they hold, and that will accept further debt in lieu of interest payments. Private actors seem unlikely candidates for permanent debt sequestration, they do want eventual cash flow from the assets they hold.

Steve Randy Waldman — Friday March 17, 2006 at 7:28am permalink
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