1qGLG9p

Case studies 39
Figure 4.2
US output, actual and past trends
63,000
US output per capita in PPP-adjusted intl dollars
and trend extrapolated through 2001
58,000
53,000
United States
Prior trend
48,000
43,000
38,000
33,000
2001 2003 2005 2007 2009 2011 2013
Source: IMF (2014b), authors’ calculations.
This over-enthusiasm is seen more starkly in debt capacity (Figure 4.3). The
solid line calculates the net present value of future output launching from the
then-current estimate of potential output. The dashed line starts the net present
value summation from the current level of output. Borrowers looking at their
current incomes in the early 2000s might not have appreciated that the thenapparent
debt capacity was unsustainable because excess demand was untenable
and growth would slow. The sharp break in the dashed line makes it plain that
debtors would be pressed to repay.
Figure 4.3
760,000
740,000
720,000
700,000
680,000
US debt capacity
US net present value of output per capita in
PPP-adjusted international dollars
660,000
640,000
620,000
600,000
Using potential
output
Using actual output
2001 2003 2005 2007 2009 2011 2013
Source: IMF (2014b), authors’ calculations.