Implicit in a widening dispersion of current account surpluses and deficits of individual economic entities is the expectation of increasing cumulative deficits for some and, hence, a possible rise in debt as a share of their income.9 Unconsolidated debt of private nonfinancial U.S. entities as a ratio to GDP has, indeed, risen at nearly 3 percent per year, on average, over the past half-century.10 From 1900 to 1939, nonfinancial private debt rose almost 1 percent faster per year on average than GDP.
The debtto-GDP ratio fell in the wake of the inflation of World War II and its aftermath, which inflated away the real burden of debt. The updrift in the ratio, however, shortly resumed. As I noted earlier, the trend toward intra-country dispersion is likely occurring not only in the United States but in other countries as well.