At the heart of this is the causation versus correlation issue.

Reader comment on: Reinhardt and Rogoff Respond

Submitted by Lyle (United States), Apr 17, 2013 17:03

Even Rogoff and Reinhardt admit that they are not sure that slow growth causes high debt levels, not the other way around, admiting that they have found a correlation. But as usual correlation does not imply causation. If slow growth implies high debt levels, and population shrinkage implies slow growth (see Japan), then the issue is being treated completly backwards. Of course once you reach the point of shrinking populations its a question of GDP or GDP/person. If the gross GDP decreases more slowly than the population shrinks all is ok. Now for sure the first few years after WWII in the US and from 1948 on in Europe were boom times, with high debt levels, but again there is a special circumstance involved making a general conclusion suspect in the extreme.

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