"Restoring fiscal discipline at the Ponzi point would cause the economy to break down for an unusually long period, failing to create jobs or growth. The ultimate threshold – call it the Keynesian end game – is when investors refuse to lend more money, forcing the government to either default or start hyperinflating (probably with some wealth confiscation added in). The difference between the Ponzi point and the end game is important. At the Ponzi point, the game isn’t over just yet, but it’s a foregone if not widely-recognized conclusion that you’re on a path in that direction. The path is firmly established because serious action to reign in deficits would wreak havoc on the economy and change the political calculus about austerity."
http://www.cyniconomics.com/2013/10/17/fonzie-or-ponzi-one-theory-on-the-limits-to-government-debt/
Commentary: So at the Ponzi point, the collapse is certain even if it hasn't happened yet. So when will the Ponzi point occur? The article says about 150% of debt to GDP. Right now the US national debt (excluding intragovernmental liabilities) is about 75% of GDP ($12.5 bn to $16.5 bn). So it could roughly double before we reach that point.
With the current projections, it doesn't look like this will happen any time soon. But the standard cure for a recession is a flood of deficit spending. The next recession (scheduled to start in October 2015 according to Martin Armstrong) will push us much closer to the danger point.
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