The NYT tells us that the increases in the debts of government caused by the collapse of housing bubbles is "startling," noting that Germany's debt to GDP ratio will rise to 77 percent next year, while Britain's will rise to more than 80 percent. There certainly have been substantial increases in government debt caused by the economic crisis, but these ratios are far below levels that countries have maintain in the past or that countries like Japan sustain at present. There is no obvious reason that these countries cannot sustain these levels of debt. It is also unclear what some of the numbers featured in the article mean. For example, after discussing government debt, the article turns to private debt, telling readers at one point that companies in China will have to borrow $8.8 billion in 2010. There are probably individual companies in China that will borrow this amount in 2010. The aggregate borrowing of Chinese companies will exceed this number by an order of magnitude.
--Dean Baker
