Wednesday, April 15, 2009

Harder-Edged Warnings About Britain’s Economy



"As job losses accumulate here, along with the government’s debt burden as it tries to fight the ravages of recession, Mr. Horscroft’s nostalgia has been joined by harder-edged warnings — from no less a critic than former Prime Minister Margaret Thatcher — that Britain’s deteriorating public finances might require the government to seek aid from the International Monetary Fund, just as it did back in 1976 when the country’s economy was on its knees."


Britain is in the opposite position of a country such as Spain (or other, Eurozone states). It is a sovereign, currency issuing nation where the government spends by crediting bank accounts (as in the United States). It can stimulate its economy to any degree that it wants.

However, this fact seems to be lost on policymakers who, amazingly, are actually raising the prospect that Britain might have to go to the IMF for help. This is truly astonishing!

Similar beliefs about debt, deficits and government spending are also rife in the United States and they could lead to the same sort of irrational policy desperation that we now see gripping Britain.

This morning, Senator Judd Gregg of New Hampshire said on CNBC that the Obama Administration was "piling on an unsustainable amount of debt." Can he prove that? At what point will the debt cause lighting bolts to come out of the sky and keep the government from punching in another number on its accounting spreadsheet?

I'd like to bet $1 million for anyone to PROVE, UNEQUIVOCALLY, that "unsustainable debt" was a real risk for the federal gov't, rather than just a catchy soundbite.

2 comments:

googleheim said...

I'm not a taker on the bet.

I've not see one solid estimate on the debt-to-gdp that is consistent across the board amongst everyone.

there are too many mechanisms to shift the debt around and make it go away.

Mike Norman said...

None of these "debt terrorists" would take the bet either, I bet!