The Default Option
Here is an important op ed from the Irish Times by a former senior IMF official, arguing that the most heavily indebted euro countries will have to default on some of their public debt. If they do not, public debt will continue to rise to even more unsustainable levels as unemployment and output losses soar.
â€œdebts that canâ€™t be paid, wonâ€™t be.â€
– Michael Hudson
Just wondering Andrew what your thoughts on Greenspan’s comments on the US situation where he stated that if a recession is brought on by deficit reduction measures, then it is better than the alternatives.
I do wonder how he uses such accounting- I guess not all that the pain felt by everybody, is actually included in his balance of accounts.
So when capitalism runs into the ditch with its constant fits and spasms, I do wonder how we are supposed to carry on with a civilization. The public does have a standard of living, and just because profit levels are not high enough, which leads to less assets in the base, and hence less employment, and etc, why do we all just accept that we can no longer afford public goods? These public goods are allocated asymmetrically based upon need, which leads to more instability in families, public services, regeneration of the next workers, and the lot of it. This also means we can forgo productive assets from being gainfully productive, again a massive loss. So if we fully account for such, how can any one economist make the statement that a mild recession could be well worth the costs.
WHY not just default, wipe those debts clear or over write them massively into the future at a discounted rate.
It is that instability that ends up costing the “civilized”, over the last 80 years and two world wars a mere couple hundred million deaths and for all the great minds and serious thinkers out there the label civilized- becomes – muted in my ears. Civilization becomes -Meaningless- mass production of destruction becomes somehow very affordable- because essentially it is profitable. pretty phracked up.
I feel these lines a lot lately and hearing Greenspan spewing such remarks and hearing the tension in the middle east rising, makes it all so meaningless. Truly- nothing really makes sense anymore.
I say burn it in a massive grand bonfire paying homage to the hundreds of millions who died trying to somehow pay for it in previous wars through the instability of the great “civilized” economic system of our time.
Here I again disagree with Paul T.
Default is better simply because if you are unable (politcally) too timid, or short sighted you cannot print money cause inflationism & tolerate higher pricees especially without matching wages, slaries, or income.
A quote by man you should respect described the situation in The Economic Consequences of the Peace, John Maynard Keynes: “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”
Frankly I do not Wiemar Germany, default is the best option.