February 16, 2009
In permanent link to Permanent Link to Debt in wartime,
Paul Krugman notes that during World War II. as the ratio of the federal
deficit to the Gross Domestic Product soared to hitherto-unimaginable
levels, the private debt-to-GDP ratio fell from 1932-onward, and
especially so during the war years, when everything was rationed and
everyone was buying war bonds. As a result, there was a pool of ready cash
to buy all those items needed for the post-war baby boom and to prevent
the economy from falling back into a state of depression.
In Permanent Link to Household balance sheets,
Dr. Krugman links to a highly informative and excellent Baseline
paper that he describes as a "must-read":
For reasons that I'll explain tomorrow, I've added the
50-day moving averages to the popular market indices, below.