National Debt Sustainability and the Dynamics in the Economy of Diamond.

We analyze the effect of a constant debt policy on capital accumulation and provide an indepth treatment of the dynamics in the economy of Diamond. We derive the conditions for avoiding a debt crisis in both the short-run and the long-run and provide geometrical tools to analyze the issue of sustainability. There is always a level of debt enduring that any level of capital between 0 and an upper limit, and in particular the Golden rate equilibrium, exists as a steady-state equilibrium ,yet it is not necessarily stalbe. We also discuss poverty trap issues.