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May 1993, No. 69
Last Updated: 04/15/1993

Debt in the 1990s

Francesca Eugeni , Steven Strongin, Paula R. Worthington

Debt in the 1980s was often pictured as a type of high octane gasoline supercharging the economy by providing investment funds and motivating management. In the 1990s, debt's image is less glamorous, more like sludge in the crankcase than hi-test in the gas tank. Since the stock market crash of 1987, when the debt craze began to falter, GDP growth has only averaged 1.8%. Even if the recession is excluded, GDP averaged only 2.5%, well below the average nonrecession growth rate of 4.4% experienced in the post-war era.