Wealth effect of government debt on consumption

Comments on Alan Kohler “Desperation masked by euphoria”, 1/10/2009, http://www.businessspectator.com.au/bs.nsf/Article/IMF-bank-write-downs-capital-raisings-double-dip-r-pd20091001-WDS7W?OpenDocument&src=sph

The problems with increased government debts are that sooner or later, it will be factored into a nation's wealth and into consumption and savings.

Most high debt countries developed countries so far have not seen that effect, but it will catch up with them one day, even though it is difficult to say how long that will be given that bubbles can be very persistent.

Japan's since the 1990 is a good example of the effect of wealth dive on consumption and the economy and its experience will be repeated by quite a number of countries.

Alternatively, some countries might run inflation reduce the burden of government debt for the government, but that can only be a disguised taxing instrument and most nations cannot escape the wealth effect of high debt.

Maybe the US will be the last one given its safe haven status so far and the fact that a large part of its government debt is held by other nations. Lucky Americans!