nico on Nostr: Debt to GDP as core metric is already looking bad in most countries but seems very ...

Debt to GDP as core metric is already looking bad in most countries but seems very misleading. For a household you would take all debt (liabilities) vs income. For a mortgage here is an example guideline for DTI (debt to income):

100% or higher DTI - these prospective borrowers represent a huge risk and do not show an ability to make regular mortgage payments. Almost all lenders will reject an application in this instance.
75% to 99% DTI - borrowers who are very high risk. A select few specialist lenders will be willing to look at the application and make a positive decision where other factors are given more weight, such as credit score and a clean credit history or substantial deposit.
50% to 74% DTI - high risk borrowers. Some specialist lenders are willing to accept applications at this level, but terms are less favourable and larger deposits are required.
40% to 49% DTI - moderate risk borrowers. Specialist lenders will want to see good credit history and may ask for larger deposits.
30% to 39% DTI - acceptable risk. Most specialist lenders will offer a mortgage at this level at standard terms.
20% to 29% DTI - good borrower. Almost all lenders are happy to approve mortgage applications at this level.
0% to 19% DTI - very low risk borrower. All lenders will consider an application

Now let’s look at US as a virtual household:

Gov income is not (yet) 100% of GDP! More like 17%. So 25.4 * 0.17 = 4.3T

Total liabilities are more like 100T, this is current and future outgoings the gov has committed to even though not all of it is funded - which doesn’t mean the liability magically goes away. Current low estimate for this is 100T.

So the debt to income ratio is about 23.2 or 2300%.

Buying gov bonds is like financing a mortgage for that household.

You know how this ends 🟠.