A few days ago we wrote about our favorite faux economist hack P Krugman (“Fauxicon”), who is out and about promoting deficits on behalf of a Democratic administration (and for those who don’t know, PK hates deficits, except when he is whoring himself for political purposes, like right now). Fauxiconman lately propagandizes that Republicans are using “scare tactics” about the size of the deficit and that in fact the deficit ‘aint no big thing. We’ve already dealt with that nonsense, but thought we’d offer this pretty picture to further expose the shifty positions he takes. The bright red bar is the USA’s total debt as a percent of GDP (annual economic output), and the blue bars are the assorted countries of Europe.
For those who don’t know, the European Union is in crisis over the fiscal mess in Greece, and potential mess in Spain, Portugal, Italy, and Ireland. It seems Greece has borrowed too much and may default on its bonds. This matters greatly to the rest of Europe because members of the EU share a currency – the EURO – and member countries must abide by fiscal discipline to keep the currency strong. Fears of a European currency crisis, which would necessitate higher interest rates, which in turn might choke off the economic recovery that is sputtering and stuttering, caused world equity markets to plunge last week.
As you would expect, the suspect countries at the heart of the crisis are at the top of this pretty debt picture. But wait, what’s that there, mingling with the walking wounded near the top of the pyramid of shame – why, it’s the USA!
Fauxiconman says we should spend-spend-spend our way out of recession and not worry about the debt….the Sword is thinking he needs a second nobel right about now.
Now lest you be worried that the USA is next in line to default, fear not. The USA has advantages that Greece & Co. do not, namely that the world’s reserve currency is still the great American dollar and the world still seems to want to park its wealth in US Treasury bonds. But there are limits that even the USA must ultimately bump up against. Do we really want China to hold the keys to whether we default on our debt down the road (by refusing to buy more US bonds)? What if the Chinese say to us:
An I can tell you honey
You can make my money tonight (6)
Do we want to one day be in a position of having to run the printing press to print dollars to repay creditors because the economy is just not large enough to cover it, thus destroying the currency and ushering in hyperinflation? Am I using “scare tactics” here? Look at the graph.
[...] July 12, 2010 by sasoc Earlier this year there was an unheard of reversal in treasury spreads (the extra yield required on corporate bonds versus treasury bonds), when, at certain points, a few corporate bonds (P&G for example) yielded less than U.S. treasuries (a corporation considered less risky than our fine government…). This was the biggest possible indictment of runaway deficits, cumulatively approaching 100% of GDP this year, putting us near the top of the ladder of shame (see this chart). [...]
[...] Each of these buffoons would have you believe that our Federal debt as a percent of GDP, which is among the highest in the world, and which is increasingly owned by the Communist Chinese of Tianneman Square fame, is not [...]