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Displaying (1) Comments | Comment on this piece | Report objectionable art
By :By :By :there doesn't have to be a day of reckoning. you can just have an emnoocy that grows at a slower rate than would be w/o deficits or stimulus. there are deficits around the world because of a massive financial crisis. budget deficits need to be brought under control but long term what needs to happen is that the national debt needs to stabilize. it doesn't need to go away.There doesn't have to be a day of reckoning but there will be if nothing is done with the current deficit levels and debt. We're around .9 debt/gdp ratio this year, and perhaps .8 or so after a recovery. That's a bad place to be either way. Healtcare makes things worse. Fighting multiple wars makes things worse. Government needs to cut spending AND raise taxes and I'm not convinced the political will exists to do it. The US, with its strong emnoocy can do some tricks inflation of the dollar transfers some of the burden to our creditors (causing us to lose some creditors). We're still the safe heaven investment choice when things go bad. We can artificially keep rates down longer. But we're slowly but surely blowing our reputation as being a country with a sound and conservative financial system (that we built up during the last century). There's no free lunch.the US 30 year is near 5%. there are no worries about the US. interest rates plunged during the crisis. some short-term debt briefly went negative. the market is not worried about the US paying anyone back. of course we can't run huge deficits.Yeah, agree that for now we're ok and there's no immediate panic. Though, arguably, part of the reason rates are so low is because of manipulation by the Fed (or indirect manipulation by debt swaps with other central banks). But once you have debt/GDP > 1, things start to get challenging, and we may fall into a debt trap where servicing costs become too high to make a significant dent in the debt. Rate this comment: 0 0
By: | Jul 21, 2012 | Report Comment
squaresallover
mzabor
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