Germany s opposition to debt forgiveness is thus bad economics, bad politics (except at home), and bad history.

Welcome to the BAD (Big Annual Deficits) decade of public debt.

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.

Interest rate spreads on Italian sovereign debt have widened, but not sharply.

And a stronger economy would help domestic banks by reducing potential bad debt and mortgage defaults.

The average high debt episodes since 1800 last 23 years and are associated with a growth rate more than one percentage point below the rate typical for periods of lower debt levels.

Greece is caught in a classic debt trap, as the interest rate on its public debt has soared beyond its growth rate by a considerable margin Spain is teetering on the brink.

This time, the unemployment rate and household and government debt are much higher.

This would be bad news for the German economy, which could delay possible ECB interest rate hikes.

A direct effect of the higher interest rate would be to increase the budget deficit and the rate of growth of government debt.

In Europe, the market for Greek debt has frozen, and interest rate spreads between Irish and German euro denominated debt recently reached alarming levels.

Moreover, the size of the bad debt threatening banks remains unknown, and could amount to several hundred billion dollars.

One reason to be concerned about the bad deal that American taxpayers are getting is the looming national debt.

Deflation increases the real (inflation adjusted) debt burden, as well as the real interest rate.

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.

On the contrary, positive expected inflation would reduce the real (inflation adjusted) interest rate not a bad thing under current conditions.

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.

Higher inflation would cause the interest rate on new debt to rise in a way that prevents the erosion of the real value of the total debt.

Even an economy with an overall budget deficit will have a declining government debt GDP ratio if the growth rate of its nominal GDP exceeds that of its debt.

Europe as a whole is not in bad fiscal shape its debt to GDP ratio compares favorably with that of the United States.

Managing modern debt crises always involves the extraordinary logic of throwing good money after bad in the hope of masking the underlying unsustainability.

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 simple structure would be to make all debt payable over 40 years, carrying an interest rate of 2 .

But in bad times, when it is important to keep banks lending, bank capital would automatically be increased by the debt to equity conversion.

Since China s current benchmark interest rate is higher than the comparable rate in the United States, individuals and institutions have an incentive to keep renminbi as assets and dollars as debt.

And, because people trade bonds for commodities, cash, and stocks, the prices of government debt are the rate of inflation, the nominal interest rate, and the level of the stock market.

Countries that borrow 3 and grow at a rate of 4 will converge towards a debt GDP ratio of 75 .

Honoring all three of those legal obligations simultaneously is impossible if Congress refuses to raise the debt ceiling, but raising the debt ceiling without Congressional approval, though illegal and an impeachable offense, was the least bad choice.

They could buy bad loans from lenders and forgive part of the principal payable by borrowers, simultaneously reducing lenders collateral requirements and borrowers debt overhang.

That is because an increase in the inflation rate causes interest rates on new debt to rise by an equal amount.

These countries existing foreign debt, by contrast, carried an average interest rate of 1.6 with an average maturity of 28.7 years.

Indeed, some emerging markets for example, Colombia had been issuing public debt at record low interest rate spreads over US treasuries.

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.

Protectionism is bad for wealth, bad for democracy, and bad for peace.

It is obvious that Yankee imperialism cannot be blamed for Venezuela s emaciated tax system, dismally bad schools, rampant corruption, high crime rate, and feeble political institutions.

He was, he now says, focusing on how fixed rate mortgages are relatively bad deals for borrowers in times of low inflation, which was a mistake.

ERW bad luck or bad intent

But an exception can again be made When both the private and public sectors are overburdened with debt, adjustment leads to a debt deflation spiral, particularly when conducted under a fixed exchange rate regime.

That could lead international investors to withhold funds from a departing country and raise substantially the interest rate on its national debt.

But, with the current low rate of household saving, the cycle of rising deficits and debt will soon make national saving negative.

In addition, to narrow the competitiveness gap, all members should be able to refinance their existing debt at the same interest rate.

For the Italian state, interest rate convergence brought a medium term reduction in debt service payments of up to 6 of GDP.

In 2007, the average household savings rate was 3.8 and household debt 101 of annual disposable income, a typical level in Europe.

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

Philosophically, the debt forgiveness approach rests on the belief that creditors share culpability for defaults with debtors, since they made the bad loans in the first place.