Our deficit is so large the world will stop buying our bonds

[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.

____________________________

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

[Beetwasher]

1. Good Post

:thumbsup:

[dipsydoodle]

2. Unlikely we would join the Euro

without a referendum and with a referendum the probabilty of not joining would increase IMHO.

[mikekohr]

3. THE LAST 3 REPUBLICAN PRESIDENTS HAVE ACCOUNTED FOR NEARLY 100% OF OUR INCREASE IN THE DEBT

Posted by mikekohr in General Discussion: Presidency


Every President, from Truman to Nixon, steadily paid down the staggering debt that was run up in our fight against Nazi Germany and Imperial Japan. That pattern came to a screeching halt with Reagan/Bush and Bush. Clinton’s fiscal policy was a brief respite during this orgy of deficit spending.

Clinton balanced 5 budgets, which is 5 times as many balanced budgets as the last 5 Republican presidents combined.


President Obama, like President Clinton, inherited a sea of red ink and a recession from his predecessor. He, like President Clinton, recognizes the importance of getting America back to work and then getting our fiscal house in order.


?

See National Debt Graph @: http://zfacts.com/p/318.html


WHY DO REPUBLICAN ECONOMIC PRINCIPLES EXPAND THE NATIONAL DEBT?
-The answer is simple mathematics. Reduced revenue + increased spending ='s increased debt-

?

http://cedarcomm.com/~stevelm1/usdebt.htm

The two biggest promises of "Trickle Down Economics" are it's greatest failings. Proponents of "Trickle Down Economics” claim that tax cuts, skewed to the rich, will create jobs and increase tax revenues. The graph above disproves the latter claim. Job creation plummets under "Trickle Down Economics (see http://bureaucountydems.blogspot.com/p/job... )and nine of the last ten recessions have occurred under Republican leadership (see http://bureaucountydems.blogspot.com/p/his... ... ).

Two things are certain to grow when a Republican is in the White House, unemployment and the National Debt.


By contrast, "Bubble Up" economnic priciples practiced by Democratic Administrations put people to work, rev up the economy, and balance the Nation's ledger books. Every time. No exceptions.

mike kohr http://bureaucountydems.blogspot.com /

[dipsydoodle]

4. Saw an analysis of this earlier this week on TV here in the UK

They projected c. 8 years max before the shit really hits the fan in USA.

Some projections here : http://en.wikipedia.org/wiki/United_States_public_debt

[Meldread]

5. Krugman is right, but the problem is more long term and not immediate.

The US and the UK are not Greece. Yet.

The problem rests in the future, when we reach a point when it becomes clear that we won't be able to repay the debt. When our debt becomes unsustainable, that is when we become Greece.

I don't think attempting to balance the countries checkbook should be considered a dirty or bad thing. In fact it can lead to some good things: No more foreign military adventurism, a cut back on military spending, sane and much needed reform to the welfare system, and if not an increase in taxes at the very least an immediate freeze on all tax cuts.

We should not be adverse to trying to solve the problem now. Certainly, since we're in the middle of a recession spending is needed - though I disagree in a large way in how the Stimulus was created (it needed to be more targeted and focused) - I also believed that it wasn't big enough. I think we could have hit so many birds with one stone. If the stimulus was focused on providing something like super low interest loans at a fixed rate, focused 100% on small business creation, and nearly 100% on renewable energy development, research, deployment, training, etc. Doubled the size of the package... well we all know the benefits of that.

Anyway, we want to put ourselves on a path to solve the problem rather than ignore it. We obviously have to pay off our debt. If we refuse to do this, then someday we will end up like Greece, and we will find ourselves in a serious crisis - and in that situation, we will have an austerity plan imposed upon us. It's much better to make the necessary choices of our own free will, now rather than later in the midst of a crisis. I don't think that'll happen though.

[Hippo_Tron]

9. I don't think the United States going into default is even a realistic long term possibility

But I think we do need to address it now because otherwise we will be facing a significantly lower standard of living in the future.

[RUMMYisFROSTED]

6. My beef is the $350B a year in interest payments.

[mkultra]

7. since we control our own currency, its seriously doubtful

we can control the value and our interest rates. Bonds are usually a solid shelter during crisis.

[gristy]

8. Our deficit is certain NOT high compared to other countries in our economic sphere

Nor is our debt.