This article is a no-brainer. Liabilities should be measured against assets or equity, not against gross value added (net output). It is very popular to express deficits or tax liability as a percentage of GDP, but often the deficits or taxes do not even match with the exact income sources included in GDP (which is only the sum of factor incomes, and includes only direct tax imposts on production). GDP does not tell you anything about asset ownership and how it is distributed. The presumption is that GDP measures the total incomes and expenditures of a country, but it doesn’t. It may of course be true that GDP growth is associated with an increased total debt liability, but that debt liability relates to the value of the total assets owned by a country, not to GDP.
For example, there are many commentaries nowadays on the high total debt level of Britain, but The Guardian recently reported that Credit Suisse had calculated that “Almost 60% of the [British] population has wealth exceeding $100,000 and there are two million US dollar millionaires”. http://www.theguardian.com/business/2014/oct/14/richest-1percent-half-global-wealth-credit-suisse-report I do not know the precise sources of that estimate, but that equity would be mainly real estate. The ability to incur debts is closely related to assets held – if the value of your residential property increases, for example, you are able to capitalize on that asset appreciation. If you own $100,000 or more, you can borrow a considerable amount with that. There would be a problem, only if the value of housing suddenly fell by a large amount, and/or if incomes suddenly feel by a large amount. "Among economic researchers there is a worldwide illiteracy in national accounting" - Frits Bos, ''The national accounts as a tool for analysis and policy; past, present and future''. Phd Dissertation, University of Twente, The Netherlands, 2003, p. 3. J.
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