This made me wonder whether the logic of “you don’t care about your absolute debt, but about its ratio to your income” also applies to individual humans. On one hand, it seems like obviously yes; people typically take a mortgage proportional to their income. On the other hand, it also seems to make sense to worry about the absolute debt, for example in case you would lose your current job and couldn’t get a new one that pays as much.
So I guess the idea is how much you can rely on your income remaining high, and how much it is potentially a fluke. If you expect it is a fluke, perhaps you should compare your debt to whatever is typical for your reference group, whatever that might be.
Does something like that also make sense for countries? Like, if your income depends on selling oil, you should consider the possibilities of running out of oil, or the prices of oil going down, etc., simply imagine the same country but without the income from selling oil (or maybe just having half the income), and look at your debt from that perspective. Would something similar make sense for USA?
This made me wonder whether the logic of “you don’t care about your absolute debt, but about its ratio to your income” also applies to individual humans. On one hand, it seems like obviously yes; people typically take a mortgage proportional to their income. On the other hand, it also seems to make sense to worry about the absolute debt, for example in case you would lose your current job and couldn’t get a new one that pays as much.
So I guess the idea is how much you can rely on your income remaining high, and how much it is potentially a fluke. If you expect it is a fluke, perhaps you should compare your debt to whatever is typical for your reference group, whatever that might be.
Does something like that also make sense for countries? Like, if your income depends on selling oil, you should consider the possibilities of running out of oil, or the prices of oil going down, etc., simply imagine the same country but without the income from selling oil (or maybe just having half the income), and look at your debt from that perspective. Would something similar make sense for USA?