February 04, 2016
The NYT had a front page article on how bad debt is threatening world growth. The article focused on China, which it indicated could have as much as $6 trillion in bad debt.
It would have been worth mentioning that China’s government could easily cover the cost of bad debt and keep its economy moving forward. The government’s debt to GDP ratio is very low, its interest burden is less than 1.0 percent of GDP, and it is more worried about deflation than inflation.
In this context, there is no economic reason the government could not put up the money to clear up bad debts. The only obstacles would be political.
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