EP 25: What I Learned This Week (with Kiril Sokoloff)
Library of Mistakes
Transitioning from High Debt to GDP to Low Debt to GDP
Transitioning from a high debt to GDP ratio to a low one can be achieved through inflation, default, or growing the economy. History shows that inflation has been used before to reduce debt, and in 2021 the US managed to decrease its debt to GDP ratio by 10% points due to high GDP. However, there are concerns about the market reaction and criticism if such strategies are openly announced by the Fed.
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