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Ug. So many misconceptions and conspiracy theories, where do I begin? 1. The US and the Eurozone are suffering from very different problems. The debt in the US
by gizmo 14y ago
Ug. So many misconceptions and conspiracy theories, where do I begin?
1. The US and the Eurozone are suffering from very different problems. The debt in the US is likely to stabilize at around 80% GDP (source: http://krugman.blogs.nytimes.com/2013/01/24/tim-geithner-is-wrong-2/ http://krugman.blogs.nytimes.com/2013/01/24/tim-geithner-is-...). European countries are in quite a bit of trouble, but it will most likely take the the form of a slow and painful recovery. Greece has already partially defaulted on its debt (and the world didn't end).
2. There is no reason to assume that many (American?) banks will collapse anytime soon. The realistic worst-case scenario is another multi-trillion dollar bailout at the expense of the taxpayer.
3. The trillion dollar coin idea was a legal gimmick to counter another legal gimmick (debt ceiling). Minting a trillion dollar coin is not substantially different from conventional methods of "printing money" (there are some differences: e.g. no interest is paid on currency). The trillion dollar coin wouldn't be used to pay off the public debt. Minting coins to pay off the public debt is a bad idea, and not a single economist seriously suggested doing that. To reiterate: the trillion dollar coin is a legal trick and has almost no impact on the actual economy.
4. The cost of printing money isn't zero in all situations. Which is why printing money can partially fix some financial problems, but not all of them. Printing money is a good idea for instance when there is a shortage of money in the economy (i.e. risk of deflation). Printing money is never a substitute for real economic activity.
5. Inflation certainly works like a tax. Those with money are hurt by inflation and those with net debt benefit from it. It also encourages investment, which is why most economists think a little inflation is a good thing.
6. US Government bonds are in very high demand. Hence the low interest rate on them.
7. Your crazy rants about how the US is a socialist state don't have any bearing on reality.
- AutoKorrect 14y ago'likely to stabilize'? Are you on crack? Congress & O can't even create & pass a budget. They talk about 'saving' a trillion dollars... over 10 years! Our armed forces are still deployed to 3rd-world cesspools that we have no business being in. Debt is going to go up and up until the balloon pops.
- mseebach 14y agoSo, for your point 1, neither Krugman nor the CBPP report he links to claims that the debt will stabilise at 80%. It will arrive at 80% with a rising slope, not flatten like the "cuts" scenario. Also, good thing you didn't link to anything containing conspiracy theories: To say what should be obvious: Republicans don’t care about the deficit. They care about exploiting the deficit to pursue their goal of dismantling the social insurance system. They want a fiscal crisis; they need it; they’re enjoying it.
- gizmo 14y agoYou're correct that the debt will continue to go up after 10 years if there are absolutely no cuts and no revenue increases. But 10 years is plenty time to bring the budget in line with GDP growth, and after the depression is behind us there should be bi-partisan interest in reducing the deficit. I'll be very surprised if the US deficit is over 80% of GDP in 10 years. The comment by Krugman about Republicans wanting a fiscal crisis to dismantle the welfare system is somewhat hyperbolic. However there are plenty Republicans who claim to care about the deficit but when push comes to shove go for tax cuts instead and then point at the lack of revenues to justify cuts in the welfare system.
- mseebach 14y agoKrugman is as "somewhat hyperbolic" as the GP. In fact, the GP qualifies his theories with "I think", Krugman states them as fact.
- digitalengineer 14y agoJust curious: Does the debt number include unfunded liabilities for social security, medicare, etc?
- mseebach 14y agoNo, "public debt" is at 73%, including "intragovernmental holdings" (social security etc) it's at 105% See here: https://en.wikipedia.org/wiki/United_States_public_debt#Measuring_debt_relative_to_gross_domestic_product https://en.wikipedia.org/wiki/United_States_public_debt#Meas... and refer to the first paragraph of the article of a definition of the two debt types.