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Debt Crisis? What Debt Crisis!

In my time as an astrophysicist I got used to, well, astronomical numbers. So there are several hundred billion galaxies each boasting several hundred billion stars. That’s cool. Not least because some might have solar systems where they can do economics but this is terrifying…

We are not having a debt crisis.

It’s important to make this point, because I keep seeing articles about the “fiscal cliff” that do, in fact, describe it — often in the headline — as a debt crisis. But it isn’t. The U.S. government is having no trouble borrowing to cover its deficit.

Paul Krugman in the NYT. If I raped and murdered a baby I would clearly be a Bad Man. Raping and murdering the countless millions to come though… As Keynes disgracefully said, “In the long-run we’re all dead.” Well, John me old silver that is looking like a very much shorter run these days.

Or to put it more bluntly it’s pretty much George Best arguing that he isn’t an alkie because the offie is still open for another fifteen minutes.

To be fair to Krugman in a technical sense he is right. The USA (and the rest of us) are not teetering on the “fiscal cliff” as much as well over it and doing 9.81m/s/s straight down and looking at some rocks most hard and pointy without a bungee. So, in a sense he is correct because we are beyond the crisis (the point of decision or whatever) and are already well and truly fucked.

So let’s watch a video

Now bear in mind two things. The first is those are $100 bills and the largest generally circulated note in the USA is $20 and the USA doesn’t owe $1,000,000,000,000 but $17,000,000,000,000.

And that is just on record debts… If you include pensions, medicare/medicaid, assorted other Ponzi schemes I have heard estimates as high as $86,000,000,000,000.

Now if we work on a Coke costing roughly $1 I leave it as an exercise for the reader to work that one out as a visualization in 12 fl oz (355ml) Coke cans. Extra marks will be given for comparing that to the distance to various heavenly bodies and to the quantity of exploitable aluminium on the planet.

H/T – The Whited Sepulchre.


  1. Sam Duncan says:

    “The U.S. government is having no trouble borrowing to cover its deficit.”

    Jeebus. That is the trouble..

    The people in the early ’90s who ended up with negative equity had no trouble getting their mortgages. The sub-prime borrowers this time round had no trouble borrowing theirs.

    I could go out right now and run up a huge sum on my credit card. No trouble.

    That doesn’t make it a good idea.

  2. Single Acts of Tyranny says:

    If interest rates in the US rise to 13% the resulting interest payment of about $2.1T would consume the entire US annual tax revenue.

    So they can’t ever put up rates voluntarily and remember rates in the 1980’s hit 15% so this is not unusual by any means. If they can’t raise rates they can’t tackle inflation by conventional means. Which means their bonds at some point start to look unattractive with say a 2% yield and 5% inflation. So fewer buyers mean the fed has to engage in more QE to buy their own bonds. So throwing QE at a rising inflation in the economy is the absolute, certain death knell.

    THE DOLLAR IS ABSOLUTELY DOOMED. And with it, the world’s fiat currency and much of its fractional banking system.

    Interesting times ahead.

  3. Paul Marks says:

    The Federal Reserve is, in the “best” Keynesian manner, creating money (from nothing) to cover the borrowing.

    The Bank of England is doing the same.

    And the European Union Central Bank also (and the Swiss Central Bank has chained itself to it – as one would expect from the local chapter of the international establishment elite).

    2013 will be bad.

    2014 will be worse.

    The long run is here.

    As for Paul Krugman…..

    Let him watch.

    Let him watch his whole squalid scheme collapse around his ears.

    “But we die also”.

    So what?

  4. PeterT says:

    All Krugman’s statement tells me is what I already knew; that he has no problem with the US turning into a run of the mill 50% of GDP tax take European style economy. I see nothing wrong in a narrow technical sense with his statement.

  5. NickM says:

    And ya think that is sustainable? Note I don’t even say doable.

  6. Laird says:

    Well, PeterT, I do see something wrong “in a narrow technical sense” with his statement. The US is monetizing roughly 60% of its new debt right now; in other words, it’s printing the money used to buy those bonds. If it can’t find actual buyers for more than half of its issuings and has to resort to monetary fraud then, yes, I would say that we are having a “debt crisis”.

    Krugman is a moron. But you already knew that. Fit company only for readers of the NYT. Water finds its own level.

  7. Mr Ed says:

    It’s so nice that Robert Mugabe, in what might have been his dotage after a brutal and murderous career, has become a beacon of economic light for the West he despises.

    Shall we nominate him for the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (the cuckoo impostor ‘Nobel Prize in Economics’), founded by the Swedish Centrl Bank, as a fitting send-off to his distinguished career?

    Although I understand that recently, UK inflation is higher than Zimbabwe inflation, I am looking back at his major monetary achievements.

  8. RAB says:

    Were did all the money go? And just as interesting a question, where did it come from in the first place?

    Every country in the western World has a National Debt, so who do they owe the money to? and how did they get it in the first place? Where is the queue of Shylock’s nervously drumming their fingers and shuffling their feet saying… Look things are getting a bit hairy out here in the real world, can we have our money back now please, with the interest of course?

    It can’t be the banks can it? They’re broke and we have to keep bailing them out. It can’t be Governments cos they’re broke too and their Central banks keep printing more to keep up the illusion of solvency. So where has all the fuckin money gone?

    Answer… Nowhere cos it was never there in the first place. It is fictional. Just look at the figures. As Nick graphically points out, a Trillion in readies is a fuckin shedload, nay warehouse full, and as I have said many times… think of it as time. A trillion seconds adds up to 32,000 years. Just printing, let alone earning a dollar a second and that’s how long it would take. The USA apparently owes 14 Trillion and the likes of UK, Germany, France etc etc owe 2 Trillion each. Add it all up and it comes to something like 60 Trillion worldwide. A preposterous amount of money, indeed an unreal amount of money because it just doesn’t exist, and is backed by nothing at all but the illusion of confidence.

    We have all been trapped in a Game of Virtual Monopoly ever since 1933 when that bastard FDR got rid of the Gold Standard. When the illusion shatters, so will we.

  9. Mr Ed says:

    I believe that some of the National Debt is sold as ‘gilts’ to pension funds and insurance companies, who hold these ‘investments, as part of a core of ‘secure’ investments as required by regulators, so a pension fund is, in part, a claim on future tax receipts (or fiat money).

    So, when your pension is invested, it pays out in the end, in part, by taxation on your pension.

  10. TomO says:

    Mildly O/T but still relevant Tim Worstall elaborates the arithmetic of UK debt versus the whinnying and bleating of the “TAX THE RICH BASTARDS” gang and quelle surprise – the sums are broken beyond parody…. be careful what you wish for in the case of UKunCUT


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