I am seeing a lot of hand-wringing in the blogosphere about the amount of debt being put on the US government's balance sheet.

Now, let me say, I am not minimizing the enormous problems in the asset markets and the general economy.  They are massive.  The numbers being tossed around as a solution to the problems are staggering, and now number in the trillions.   That's plural, and with a "t."  The fact that we allowed ourselves to get into this mess is unconscionable.

However, the amount of debt that America is going to raise relative to output is not unprecedented.  Debt to GDP hit 120% during World War II, roughly double the ratio today.

We did not collapse into an abyss in 1946.  And we will not collapse into the abyss any time soon either.

True, we have come far too close to the abyss than we should have.  This recession is going to be nasty and possibly prolonged.  And there is a pretty good chance we will go through another shock if and when the credit default swap market unwinds. 

However, there is still substantial room to raise a whole lot more debt, especially when investors are more than willing to take multi-decade low yields to hold US government paper.