Gerstner calculates that 2.5-3.5% annual productivity growth for a decade could substantially reduce the US debt-to-GDP ratio.
“if productivity for the next decade or so was about two and a half to three and a half percent per year, we could achieve substantial reductions in this key ratio of debt to GDP.”
Gerstner notes 1990s experts wrongly predicted debt-to-GDP would rise to 80%; instead it fell from 60 to 40.
“in 1993, debt to GDP was supposed to go from 40 to or 60 to 80 by experts, it in fact went from 60 to 40. Yes. So experts can be wrong by a lot.”
Gerstner argues sovereign wealth fund must clear 5% hurdle rate given $40 trillion debt at 5% cost.
“So we're a debtor nation, and we're paying 5% on all that debt. So the hurdle rate to our return that is needed on the sovereign wealth fund, right, is 5%.”