Tag Archives: Krugman

A Little Debt Ditty

A recent article from Paul Krugman got my little gears turning.  In the article, Debt Is (Mostly) Money We Owe to Ourselves, he makes the comment that “…the debt we create is basically money we owe to ourselves, and the burden it imposes does not involve a real transfer of resources.”  He bases this comment on the following graph

What This shows is that most of the debt that we owe – government, personal, and “non-financial” business is mostly owed to ourselves. The Chinese do not “own us” as the conservatives and tea-partiers like to rail on about, to any extent . But what does this mean? Well what it says to me (and feel free to correct me) is that it is essentially a closed system. You have Ted, Bill, and Jon.  Bill owes Ted $6; Jon owes Bill $3; and Ted owes Jon $2.  In aggregate everyone has a total debt of $11.  But lets say you reduce down the Jon/Bill/Ted triad.  You end up with you end up with Jon owing Bill $1 and Bill owing Ted $4.  Seems a bit more manageable, no?  As an extension of this thought, If you look at the following graph (courtesy of Wikipedia/CIA) of external debt (debt owed to entities outside the country) You see that almost every country owes someone else.  I will note this is not net external debt so there are nations owed money by others nations and will have a net negative debt.  But I believe the aforementioned principle at the least loosely applies.

(in US $; 2005)

Now back to the first graph.  If you add in “financial sector” debt (see here) our total debt as a nation is 300% of the GDP.  To give a sense of scale, our GDP is in the ~$15T range, so our total debt is around $45T.  Now the total national household wealth is  ~$50T depending on your method of calculation.  I showed before in National Debt … that the government debt, while somewhat painful, is completely manageable when scaled in terms of personal wealth.  Using the total debt number, $45T, that assumption becomes just simply painful.  The bottom 90%, in theory, on average owe one and a half times their yearly earnings to retire all debt.   But I have to think that that large fraction of that amount that we “owe ourselves” can be ‘reduced’ using the Bill-Ted-Jon methodology above.  I wonder about this because given the logic used and screams of doom from the right, and given the numbers above you would think that the whole thing would have collapsed long ago.  But look at Japan.  Their total public and private sector debt is almost 500% of their GDP (and has been that way for sometime) and they have not imploded.  If you look at the following historical chart you can see that while our debt is at all time highs it is on the same order as historical trends.

I am in no way trying to say that debt is unimportant, but that it is manageable, for now, and that perhaps we should be spending money on jobs, social programs & infrastructure, as opposed to this austerity agenda being put forth by the GOP.  An austerity agenda which has been tried and demonstrably failed in Europe.

Leave a comment

Posted by on February 5, 2012 in Economy


Tags: , , , ,

And The New Year Begins

Alrighty folks, a new year is upon us.  I hope everyone had a delightful holiday season.  Mine was quite a little clusterfuck, but cest la vie, it is over and onto a new year. Let’s start with a few things

  • An oldie but a goldie, and oh so relevant

“I’m very proud to know the Koch brothers. This may be a breaking news announcement for the media: I am the Koch brothers’ brother from another mother.”
~Herman Cain, creepily admitting that he’s REALLY close to the Koch brothers.

“One of the things I will talk about, that no president has talked about before, is I think the dangers of contraception in this country. It’s not okay. It’s a license to do things in a sexual realm that is counter to how things are supposed to be. [Sex] is supposed to be within marriage. It’s supposed to be for purposes that are yes, conjugal…but also procreative. That’s the perfect way that a sexual union should happen…This is special and it needs to be seen as special.”
~Rick Santorum, opposing contraception and frighteningly suggesting that he would love to make pre-marital sex illegal.

“There’s no question at times of my life, partially driven by how passionately I felt about this country, that I worked far too hard and things happened in my life that were not appropriate.”
~Newt Gingrich, blaming his many affairs on his patriotism.

“Corporations are people, my friends.”
~Mitt Romney, declaring that corporations are people in front of a crowd of real people in Iowa.

  • A little clarity from Krugman on the debt

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction.

Leave a comment

Posted by on January 2, 2012 in Economy, Politics


Tags: , , , , , , ,

??? — I Can’t Even Laugh

It’s just too crazy.

If we weren’t living in this really weird alternate universe right now, ….. where this type of thing is a normal, sane attempt at problem solving, (yeah), ——– I’d be rolling on the floor over this one right now.    Instead,…. I’m feeling a little sick.

From Krugman’s blog–

December 1, 2011, 5:19 pm

Also, No Sleeping Under Bridges

They just can’t help themselves:

In addition, Senate Republican leaders would go after “millionaires and billionaires,” not by raising their taxes but by making them ineligible for unemployment compensation and food stamps and increasing their Medicare premiums.

I mean, there are lots of millionaires on food stamps, right?

Leave a comment

Posted by on December 1, 2011 in Economy, Politics


Tags: ,

So This is the Smartest Guy in the Room?

Newt…, Newt…, Newt…,———————–

This reminds me of something I heard Krugman say last week….. “Newt Gingrich is a stupid person’s idea of what a smart person should sound like”.

I’m not a politician,— I couldn’t run a campaign for the proverbial dogcatcher’s position and win.

But this much I do know.  When Newt starts taking little shots like this at Fox News,…

“One of the real changes that comes when you start running for President — as opposed to being an analyst on Fox — is I have to actually know what I’m talking about,” he said. The woman let out a startled laugh, and the audience joined in. “It’s a severe limitation,” Gingrich added.
 It won’t be long till all those crazies that follow Fox like a religion will be howling at the door. They’ll take you down quick.
 For the smartest guy in the room,… you’re pretty dumb.   You’re not campaigning, you’re doing a perpetual damage control.
Leave a comment

Posted by on November 30, 2011 in Politics


Tags: , , , ,

Mr. Krugman

Has got to stop this totally unacceptable practice of making sense.

Doesn’t he know that it makes Bill O’Reilly unhappy?  Disgusts him, actually.

And now he’s gone and found someone else that is too damned close to making sense.

No stringing bits and pieces of economic logic together, please.   Can’t have it.

>>>  November 23, 2011, 11:20 am

Paul Solman Is Shrill


I’ve been saying the following to friends and colleagues for months now: In all my many years as a business and economics reporter, I have never seen a greater cognitive dissonance than in the current coverage of the U.S. bond market. Even Chicken Little and the Boy Who Cried Wolf would have by now taken early retirement had their warnings proved as lame as those of the MSEM (mainstream economic media).

“S&P Downgrades!” “Bond Vigilantes Poised to Strike!” “America is Greece!” One-liners meant to catch the eye, freeze the heart. But flat-out irresponsible.

And, checking with NYU’s celebrated economic historian Richard Sylla, we find that today’s rates are astonishingly close to the lowest in the entire history of the United States: 1.85 percent, the nadir reached in late 1941. That was the record, I should say — until September 22, when the 10-year U.S. interest rate plunged briefly to 1.695 percent.

So what’s going on? Well, rather obviously, investors are a lot more worried about the credit of Greece — or Spain or Italy — than ours. Investors are also more worried about stock investments. Investors are also more worried about almost any other asset into which they might put their money.

Investors also seem pretty sure that U.S. inflation is not going to be a problem anytime soon. If inflation scared them, they’d hardly let the United States lock in an interest rate of less than 2 percent for an entire decade.

So then why isn’t it plausible to draw the following conclusion: that U.S. interest rates have been going in the “wrong” direction because investors are scared that the U.S. is going to reduce its debt and deficits, and such a reduction might horse-collar the world economy?

Solman better watch it. He’s in danger of not being considered Serious, which is what happens when you let facts get in the way of your orthodox narrative.

Leave a comment

Posted by on November 23, 2011 in Economy, Politics


Tags: , ,

Love It

The Absolute Coolest Costume You’ll See At Occupy Wall Street Today

Paul Krugman with his macro-mallet, holding the head of a supply-side  monster.

Occupy costume

Image: Robert  Johnson

Leave a comment

Posted by on October 31, 2011 in Humor


Tags: , ,

%d bloggers like this: