Well.. I don't want to believe it.
But I have a very bad feeling this time. No, I am not predicting a default. Rather, my unease stems from the sheer size and spread of the debt problem all around the world. I cannot see how this global FUBAR situation will be resolved without wrenching upheaval, given that political and financial leaders clearly do not want to address the problem at its core, never mind the common people.
I have frequently referred to Permagrowth as the root cause of the Debt Crisis, i.e. the single-minded expansion in the consumption of everything, fuelled by ever more debt. Obviously, exponential growth within a closed system leads to disaster.
If we do not willingly renounce Permagrowth as our leading economic paradigm what I fear is ahead is an involuntary and abrupt end, one that will result in chaos.
Think of putting a pressure cooker on the stove, with the safety valve closed...
What about the comments that argue that even if the "shut down" should continue after octoter 17, there would be no default as the interests on the existing debt would be paid without problems? It would only force the american government to live with a balanced budget, and this would be an excellent thing.
ReplyDeleteWhat you suggest would require:
ReplyDeletea) A balanced primary budget PLUS
b) A surplus big enough to cover all interest payments on debt already outstanding.
As things stand right now, this is impossible.
AFAIU the argument is: fiscal entries are 10 times bigger than interest payments on debt, so no problem to pay those interests, which means no default. The rest of the fiscal entries would be for government spending, whatever remains. What is wrong with this argumentation?
ReplyDeleteOf course, I can see that this would create a depression. Would that depression be so huge that at the end fiscal entries would less than interest payments? Who did the calculation? Is this calculation impossible? If yes, then the so called economic "science" does not deserve that name.
Arnould, France
Sustainability is not politically viable because it entails various aspects, from lower profits for the corporations who finance the political class to less flashy standards of living for the population. What they don't realize is that their standards of living will be much more stable and livable. Not to mention the benefit to the planet.
ReplyDelete“I cannot see how this global FUBAR situation will be resolved without wrenching upheaval..”. I can. At least as far as so called “national debt” is concerned, I see not problem at all, and for reasons I set out here:
ReplyDeletehttp://ralphanomics.blogspot.co.uk/2013/03/the-national-debt-and-deficit-are-total.html
Moreover, it is far from clear that so called “natinal debts” really afre debts (as the word is normally understood). Isabella Kaminska said in a recent FT aritcle that the phrase “national debt” might as well be replaced with “national savings”. See end of her article here:
http://ftalphaville.ft.com/2013/10/11/1664302/why-the-level-of-government-debt-may-not-matter/?Authorised=false