“You can’t borrow trillions of dollars a year for the rest of time,” Ferguson says in an interview with The Daily Ticker at the Milken Institute Global Conference 2013. “Once a government gets to a very very high level of debt, the risk is very small increases in borrowing costs which create a vast ocean of red ink. So that risk is not negligible. Very large debts do not simply disappear by magic.”
Ferguson argues that Carmen Reinhart’s and Ken Rogoff’s conclusions about the relationship between high debt and low growth are still true. The two Harvard economists had to defend their seminal book “This Time is Different: Eight Centuries of Financial Folly” after three University of Massachusetts academics “correctly identified a spreadsheet coding error that led us to miscalculate the growth rates of highly indebted countries since World War II,” according to Reinhart and Rogoff. (Lawmakers across the world cited their work as justification to institute austerity policies; they argued that economic growth slowed after a country's public debt equaled 90 percent of its GDP).