Book contents
- A Great Deal of Ruin
- A Great Deal of Ruin
- Copyright page
- Contents
- Tables
- Preface
- I Introduction
- Part I Financial Crises
- Part II Five Case Studies
- Part III Lessons
- 8 Markets Do Not Self-Regulate
- 9 Shadow Banks are Banks
- 10 Banks Need More Capital, Less Debt
- 11 Monetary Policy Does Not Always Work
- 12 Fiscal Multipliers Are Larger Than Expected
- 13 Monetary Integration Requires Fiscal Integration
- 14 Open Capital Markets Can Be Dangerous
- 15 Not All Debt Is Created Equal
- Conclusion
- Abbreviations and Acronyms
- Bibliography
- Index
15 - Not All Debt Is Created Equal
from Part III - Lessons
Published online by Cambridge University Press: 05 August 2019
- A Great Deal of Ruin
- A Great Deal of Ruin
- Copyright page
- Contents
- Tables
- Preface
- I Introduction
- Part I Financial Crises
- Part II Five Case Studies
- Part III Lessons
- 8 Markets Do Not Self-Regulate
- 9 Shadow Banks are Banks
- 10 Banks Need More Capital, Less Debt
- 11 Monetary Policy Does Not Always Work
- 12 Fiscal Multipliers Are Larger Than Expected
- 13 Monetary Integration Requires Fiscal Integration
- 14 Open Capital Markets Can Be Dangerous
- 15 Not All Debt Is Created Equal
- Conclusion
- Abbreviations and Acronyms
- Bibliography
- Index
Summary
During the Subprime Crisis and its aftermath, the US federal debt ratcheted up dramatically. By 2012 it was equal to almost 100 percent of GDP and in the next year it crossed that symbolic level. While the ratio of debt to GDP was climbing before the crisis, the increase in both deficits and debt during the crisis created a political backlash. Conservatives and deficit hawks opposed any further increases in spending and tried to cut both discretionary spending and mandatory entitlements.
Relative to the size of the economy, the largest debt in recent US history was just over 118 percent of GDP in 1946. Most observers probably justified wartime expenditures as warranted given the existential threat of Nazism, but the debt accumulated during the Subprime Crisis did not have a similar rationale, particularly when it was assumed that it was largely due to bailouts of financial institutions, auto companies, and other private enterprises.
- Type
- Chapter
- Information
- A Great Deal of RuinFinancial Crises since 1929, pp. 279 - 295Publisher: Cambridge University PressPrint publication year: 2019