The problem with this view is the fallacy of composition: when everyone tries to pay down debt at the same time, the result is a depressed economy and falling inflation, which cause the ratio of debt to income to rise if anything. That is, we’re living in a world in which the twin paradoxes of thrift and deleveraging hold, and hence in which individual virtue ends up being collective vice.
So what Mr. Krugman. Maybe it should fall. Maybe we could get back to some kind of organic economic growth. I should never read this guy at 2 in the morning....
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