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Mon Nov 26, 2012, 11:08 AM

Krugman: This Is The Chart That Debunks What Everyone Says About The National Debt

KRUGMAN: This Is The Chart That Debunks What Everyone Says About The National Debt

Joe Weisenthal | Nov. 25, 2012, 11:05 AM | 18,672 | 64

Paul Krugman posts a simple chart that makes a profound point.

It compares the yield on UK debt vs. US debt.



What should stand out for you, instantly, is that the two countries borrow at virtually identical rates, and have for years.

What this should show to people is that much of the popular stories that people tell about sovereign debt is a myth.

Countries that borrow in their own currencies and can "print" at will don't have default risk, so their borrowing costs are an expression of expectations of future interest rates and growth. The US has been notably profligate since the crisis. The UK (under Cameron) has been prematurely austere. The upshot: it hasn't mattered much on the yield front.

MORE



Krugman Blog LINK: http://krugman.blogs.nytimes.com/2012/11/25/incredible-credibility

- snip -

But won’t that money printing cause inflation? Not as long as the economy remains depressed. Budget deficits could lead people to expect higher inflation down the road, once the slump finally ends — but that would be a good thing for the economy in the short run, discouraging people from sitting on cash and weakening the exchange rate, thereby making exports more competitive.

The point, then, is that the whole “credibility” argument is incoherent.

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Arrow 7 replies Author Time Post
Reply Krugman: This Is The Chart That Debunks What Everyone Says About The National Debt (Original post)
Hissyspit Nov 2012 OP
1StrongBlackMan Nov 2012 #1
nadinbrzezinski Nov 2012 #2
ronnie624 Nov 2012 #3
1StrongBlackMan Nov 2012 #4
nadinbrzezinski Nov 2012 #5
ronnie624 Nov 2012 #7
msongs Nov 2012 #6

Response to Hissyspit (Original post)

Mon Nov 26, 2012, 12:02 PM

1. The problem is ...

too many people (including many Democrats) attempt apply Household Economics to the Economics of Nations with a Sovereign Currency. While the former is easier to undersatnd because we deal with it on a daily basis; it has nothing to do with the latter.

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Response to 1StrongBlackMan (Reply #1)

Mon Nov 26, 2012, 12:17 PM

2. Here is how I deal with that

Do you have a credit card?

Well, yes.

Do you float debt on it?

Yes.

So you mean you don't run a balanced budget?

I know it is simple, but it works.

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Response to nadinbrzezinski (Reply #2)

Mon Nov 26, 2012, 12:32 PM

3. Debt is integral to a functioning economy, of course,

but infinitely accelerating debt is not logical. At some point, such a system would have to be come unstable.

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Response to nadinbrzezinski (Reply #2)

Mon Nov 26, 2012, 01:00 PM

4. Look at the post immediately following your post ...

and see why your explanation (while completely accurate) doesn't work with most in the public ...

The poster say:

Debt is integral to a functioning economy ...


and,

of course, but infinitely accelerating debt is not logical. At some point, such a system would have to be come unstable.


In the same post.

Where an understanding of National Debt/Sovereign Currency would reveal that national borrowing is never "unstable", household economics can never fathom it because "eventually we have to pay our credit card bill."

The difference being, we can borrow until the global community is unwilling to buy our debt; at which point we purchase back (by "printing more money") our own debt; thus allowing us to issue more debt, that the global community - having been paid back, is happy to purchase.

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Response to 1StrongBlackMan (Reply #4)

Mon Nov 26, 2012, 01:05 PM

5. There is a point that can't be helped

and the propaganda that we cannot deal with this debt in a rational manner, except austerity, is strong all over the place.

But I have used this explanation in the flesh and blood, and it usually works. It puts it in a context people understand. I usually throw into it the mortgage as well.

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Response to 1StrongBlackMan (Reply #4)

Mon Nov 26, 2012, 01:22 PM

7. Lol. n/t

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Response to Hissyspit (Original post)

Mon Nov 26, 2012, 01:19 PM

6. democratic politicians' propaganda about the debt enables republicans nt

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