In part, the decline was due to increased holdings of foreign public debt relative to private debt.

Even with the latest deal, Greece s debt ratio remains at 120 of last year s GDP.

After all, more debt (relative to equity) means a higher payoff when things go well.

Thus, a higher proportion of debt in the firm's capital structure leads to higher ROE.

But that simply shifts leverage to the public sector, with any reduction in the ratio of private debt to GDP more than matched by an increase in the public debt ratio witness the Irish and Spanish governments high and rising debt burdens.

If the government s contingent liabilities are included, China s debt GDP ratio may be closer to 50 .

In fact, there is a gradual and smooth decline in growth rates as debt GDP ratios increase 80 looks only trivially better than 100 .

Up to the late 1990 s and the advent of monetary union, most European Union sovereign debt was domestically held in 1998, the overall ratio of foreign held debt was only one fifth.

Historically the debt portion of a LBO will range from 60 90 of the purchase price, although during certain periods the debt ratio can be higher or lower than the historical averages.

The ratio of total public debt to GDP was less than 22 in 2007 2008, before the global financial crisis.

In advanced economies, the main mechanisms for transmitting balance sheet damage to the real economy were credit rationing and reduced consumption due to loss of net worth in households.

These subsidies are dangerous they encourage excessive risk taking and very high leverage meaning a lot of debt relative to equity for each bank and far too much debt relative to the economy as a whole.

According to a study by Goldman Sachs, France would have to depreciate by around 20 relative to the eurozone average, and by about 35 vis à vis Germany, to restore external debt sustainability.

The authors conclude that, by reducing the share of short term foreign currency debt in a country s total liabilities, capital controls can reduce vulnerability to financial crises.

When the recession is over, the US and virtually every other country will have substantially higher debt to GDP ratios.

At any time in history, the debt to annual GDP ratio (including informal debts) would vastly exceed 100 .

While the lock law helped to boost the participation rate in the 2005 exchange, holdout creditors remained, and have pursued litigation to force repayment.

Those countries succumbed to the resulting temptation to increase government borrowing, driving the ratio of government debt to GDP to more than 100 in Greece and Italy.

Relative to the recent past, the cost of capital will increase, debt will be more expensive and less ubiquitous, and risk spreads will not return to pre crisis compressed levels.

The G 8 and the European Union are determined to cancel 100 per cent of the debts owed by the world's poorest countries to the International Monetary Fund, the World Bank and the African Development Bank.

Almost 80 per cent of Africa's debt is owed to official institutions, about one third of which is multilateral debt owed mainly to the International Monetary Fund (IMF) and World Bank.

In the short term, it is important that monetary policy in the US and Europe vigilantly fight Japanese style deflation, which would only exacerbate debt problems by lowering incomes relative to debts.

Growth in a Time of Debt, the short 2010 paper in which Reinhart and Rogoff claimed that public debt starts to have a significantly detrimental effect on economic growth once it reaches 90 of GDP, was never a celebrated piece of economic research.

Debt

First, the scale of the debt burden built up over close to 20 years of conflict was monumental, amounting to more than 4 billion three to four times the level of indebtedness relative to income of the most severely indebted European countries currently facing difficulties.

In 2011, France s ratio of new debt to GDP was three times higher than Germany s, with the public sector accounting for more than 56 of national income.

According to the International Monetary Fund and others, these economies ratio of public debt to GDP will surpass 110 by 2015, compared to 70 before the crisis.

Debt and Delusion

Debt and Democracy

The Debt Delusion

Debt relief

The country simply cannot keep on piling debt upon debt.

Higher deficits, moreover, would cause the ratio of debt to GDP to rise from its already high level, which implies greater debt service costs and, therefore, even larger deficits.

Debt Déjà Vu

Europe s Debt Wish

(d) Debt burden

Austerity and Debt Realism

Debt and America s Decline

The Debt Death Trap

The Government Debt Bomb

Haiti External debt

External debt

External debt

Extending this idea to sovereign debt, government bond covenants could stipulate that if a sovereign s debt GDP ratio exceeds a specified threshold, principal and interest payments to bondholders would be automatically reduced.

But longer term US interest rates are very much affected by what happens in the rest of the world and how private sector investors view US government debt relative to other countries sovereign debt.