Comments:Greek lawmakers pass new austerity law despite violent protests

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Ratio of national debt to gdp: is it the right question?008:39, 25 October 2011

Ratio of national debt to gdp: is it the right question?

That Greece's national debt is a hundred sixty-two percent of this year's GDP sounds terrible. But compare that to the mortgage on a house, which, while probably also something in which people are in over their heads, is liable to be a similarly large ratio to an individual's income. And yet, if a person's work is stable, and provides a good income, there is not this level of doubt as to solvency, that is here leveled, instead, at the national income. Of course, the differences in the two cases are too many to make much of it, but it does show that simply to make the statement about debt and gdp explains nothing to we ordinary readers of the news.

Some questions to be asked are: what is the interest due this year, and what proportion of this year's GDP is it? It perhaps is a shame that it is a matter of mathematical ratio's that the percentage is likely higher on the very same year a country has a recession and consequent lower GDP. This would be the year, in such a case, in which wouldn't it be great if the EU would pitch in to help Greece delay payments into a future year, by the advancement of a loan or other help. It is also not to be regreted, if the ratio of interest on loans is a high percentage of GDP, under an idea that such interest payments represent an annual loss to GDP over the case in which nothing was owed; for a high owed interest implies also an equivalently higher GDP, than in the case with no debt, produced by the base loan on which the interest is owed. Aside from this, clearly GDP for a given year does not represent the national capital, but rather the return on a much larger national capital which produces it; and the interrest for this year, then, on such 1.5 percent of annual GDP national debt, is likely to be a very small portion of GDP, perhaps indicating that it is regretable that much more hasn't been borrowed.

Mac2 (talk)08:07, 25 October 2011