The Tuesday Podcast: How Much Debt Is Too Much?

This much debt is too much. (Athens, June 15)

This much debt is too much. (Athens, June 15) Lefteris Pitarakis/AP hide caption

itoggle caption Lefteris Pitarakis/AP

Say you're a country with a pretty big national debt. Investors are willing to lend you money at a low interest rate, so you can pay your bills without too much trouble.

But then one day, investors get nervous and start demanding higher interest rates. All of a sudden, you have to devote more and more of your money just to pay off your debt.

Your economy starts to falter, and investors demand still higher interest rates. Now you're really in trouble.

What causes this to happen? Is there some debt threshold that countries cross before they get into trouble?

On today's Planet Money, we put that question to Ken Rogoff — a Harvard economist and an expert on the history of sovereign debt crises. We talk to Rogoff about three countries in particular: Greece, Italy and the U.S.

Here's the reading list from Prof. Rogoff and his co-author, Carmen Reinhart:

Subscribe to the podcast. Music: Mumford & Sons' "The Cave." Find us: Twitter/ Facebook.



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