The key problem in Academic Economics at the moment is that it’s been replaced by tortoise shell shaking Shamen muttering mystical protestations of faith in the cult worship of Mammon by fairy believing fools.
The Misinformation Around Debt
By: David Dayen, Firedog Lake
Monday January 2, 2012 10:15 am
(T)he key problem for US debt at the moment is that there won’t be enough of it to meet current demand. Choppy waters elsewhere have made US Treasuries, the same ones supposedly downgraded by Standard and Poor’s, perceived as the safest financial instrument in the world. Treasuries sold at a higher pace than anytime since 1995. Government could finance at a negative long-term interest rate. The markets want the government to borrow more so they can get their hands on more Treasuries. This will also likely increase economic performance, improving yields across the board.
Nobody Understands Debt
By PAUL KRUGMAN
Published: January 1, 2012
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.
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Washington isn’t just confused about the short run; it’s also confused about the long run. For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.
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(W)hen people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about – and the people who talk the most understand the least.Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!
And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts – that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.
Clap louder. LOUDER!!!
What is it about loud that you don’t understand?
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