Our deficit is so large the world will stop buying our bonds [View All]

[Kurt_and_Hunter]

Something all Republicans and an alarming number of Democrats believe:

"Our deficit and debt are so large the world will stop buying our bonds."

Well, maybe that will happen... when the world stops buying bonds altogether.

Krugman posted this chart today to make the point that though Greece and Britain both have huge deficits, Britain's bonds and bond derivatives are not in crisis mode because Britain has its own currency.



What caught my eye was the US, apparently the most desirable and untroubled bond issuer in the western world despite being a nation we hear every day is approaching third-world debt status... mired in a debt crisis like the world has never seen... worse than flying monster heads... buy gold and ammo before it's too late.

Some Republican on TV yesterday announced that our national debt/GDP ratio is approaching 60% and that when we cross 60% that's third-world nation status. (There is no such rule of thumb, of course. He was being a Republican.)

Everybody seems to believe this stuff except professional bond traders investing actual money. They don't seem worried. They have not seemed particularly worried at any point in our supposed crisis.

Our deficit and debt are high but lower than most comparable nations. Everyone is running huge deficits because the world economy rolled off the table a while back. (I remember hearing something about that...)

And in the eye's of the world our fiscal situation is relatively pretty good.

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Krugman: Why Isn’t Britain In More Trouble?
http://krugman.blogs.nytimes.com/2010/04/30/why-isnt-britain-in-more-trouble/