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Krugman: CBO Doesn't Know How To Read Its Own Report

Tyler Durden's picture


Submitted by Robert Murphy via Mises Canada blog,

Paul Krugman reads the latest long-term forecast from the US Congressional Budget Office (CBO) and he likes what he sees. Even though the nearby graph is the CBO’s projections for the growth of federal debt, Krugman nonetheless offers this rosy commentary:

Nick Bunker notes an important point about the CBO’s new long-term fiscal projections (pdf): The budget office has marked down its estimate of long-term interest rates…


This markdown has the effect of making the budget outlook — which was already a lot less dire than conventional wisdom has it — look even less dire. But there’s a further point worth emphasizing: the CBO has just declared an end to the debt spiral.


You’ve heard the story: the more debt we have, the more we pay in interest, so the bigger the deficit, and the faster debt grows, until boom, we’ve turned into Greece, Greece I tell you.


…So we turn to Table A-1 on page 104 of the CBO report, and we learn that for the next 25 years CBO projects an average interest rate on federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent. And this means no debt spiral at all.


Now, wait a second, you may say: higher debt will mean higher borrowing rates, because people will fear that we’re about to turn into Greece, Greece I tell you. That was the theme of quite a few analyses…


As many of us pointed out, however, such results were driven almost entirely by the euro crisis; high-debt countries that borrow in their own currencies haven’t seemed to face anything like the same costs…


I don’t want to say that debt doesn’t matter at all. But it clearly matters a lot less than the fearmongers tried to tell us.

Huh, even though that graph–which I took from the cover of the CBO report–looks pretty scary, apparently the report actually shows that the budget outlook “is even less dire.” I mean, Krugman tells us that the CBO has declared “an end to the debt spiral,” and some of the numbers on page 104 of the report apparently mean that the fearmongers are full of it–we don’t need to worry about the debt getting out of control.

In contrast to Krugman’s optimistic assessment of what the CBO report says, here’s a decidedly different take:

The gap between federal spending and revenues would widen after 2015 under the assumptions of the extended baseline, CBO projects. By 2039, the deficit would equal 6.5 percent of GDP, larger than in any year between 1947 and 2008, and federal debt held by the public would reach 106 percent of GDP, more than in any year except 1946—even without factoring in the economic effects of growing debt.


Beyond the next 25 years, the pressures caused by rising budget deficits and debt would become even greater unless laws governing taxes and spending were changed. With deficits as big as the ones that CBO projects, federal debt would be growing faster than GDP, a path that would ultimately be unsustainable.


How long the nation could sustain such growth in federal debt is impossible to predict with any confidence. At some point, investors would begin to doubt the government’s willingness or ability to pay its debt obligations, which would require the government to pay much higher interest costs to borrow money. Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country.


Even before that point was reached, the high and rising amount of federal debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget…

Well gee whiz, what kind of fearmonger wrote this shoddy analysis? As Krugman gets sick and tired of pointing out, talking about the debt leading to a “fiscal crisis” and spiking interest rates just shows how ignorant the analyst is, because everybody knows this type of thing can’t happen to the United States. You would think that someone describing the CBO analysis would finally get it, since–Krugman has just assured us–the new CBO report shows that there will be no debt spiral and that the fearmongers are full of it.

So where did I grab the above analysis? The Heritage Foundation? The Wall Street Journal? John Cochrane’s blog?

Nope, I quoted the above from the Executive Summary of the new CBO report itself. But it doesn’t appear until page 3 of the report, so I’m guessing most of Krugman’s readers won’t see it.


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Mon, 07/21/2014 - 14:09 | 4984514 Arius
Arius's picture

with all due respect to Mr. Krugman, he might be wrong this time ... CBO after all is the Guvernment!

Mon, 07/21/2014 - 14:17 | 4984544 knukles
knukles's picture

Somebody please....
Ebola.  There's a handy outbreak over Niger way ...
Broken windows...
Go investigate...
Do Something!
Retire, for fucks sake
Go away
Learn to use a nail gun
Run away


It is irresponsible letting this man run amok.

Lead by example. 
Personally take in 100 2 legged sand fleas

Mon, 07/21/2014 - 14:30 | 4984605 max2205
max2205's picture

Peak Krugman

Mon, 07/21/2014 - 14:34 | 4984620 flacon
flacon's picture

"GDP = C + I + G + (X-M)" is a false formula. Keynes (Krugman) was wrong all along. 

Mon, 07/21/2014 - 14:35 | 4984626 remain calm
remain calm's picture

Krugman is anencephalic.

Mon, 07/21/2014 - 15:49 | 4984931 NoDebt
NoDebt's picture

He has no penis?  I never heard that about him before.  

No brain, sure, everyone knows that, but missing yet another important organ is really making me feel sorry for the guy.

Mon, 07/21/2014 - 16:09 | 4985019 Herd Redirectio...
Herd Redirection Committee's picture

Government accounting....  You know that once you go work for the gov't as an accountant, the private sector won't take you back?

Mon, 07/21/2014 - 19:54 | 4985848 Richard Chesler
Richard Chesler's picture

Clearly none of you understand the exciting new field of doucheonomics.


Mon, 07/21/2014 - 15:20 | 4984825 Ariadne
Ariadne's picture

Post Krugman

Mon, 07/21/2014 - 19:27 | 4985738 ugmug
ugmug's picture

Krugman is going to have a sex change operation so he can be the first person to be a Nobel Prize winner as a male and female.

Mon, 07/21/2014 - 15:39 | 4984889 yogibear
yogibear's picture

When the US dollar crashes Krugman will say because there wasn't enough debt and stimulus.

Mon, 07/21/2014 - 15:51 | 4984942 Balvan
Balvan's picture

By the time dollar crashes, none of us will be alive, certainly not Krugman who is in his 60s

Mon, 07/21/2014 - 16:08 | 4985017 Herd Redirectio...
Herd Redirection Committee's picture

Boy are you in for a surprise.

Mon, 07/21/2014 - 14:36 | 4984611 daxtonbrown
daxtonbrown's picture

"federal debt of 4.1 percent and an average growth rate of nominal GDP of 4.3 percent."


Gee, a 4.3 percent NOMINAL GDP growth rate to eternity. Like who doesn't believe that's going to happen. I mean, at some point we have to assume there are monkeys writing this shit at the CBO. And then they take this poop and fling it at us like we are idiots.

Mon, 07/21/2014 - 14:48 | 4984693 sodbuster
sodbuster's picture

This is what "experts" always do- they take current data, and extrapolate it out to eternity. Interest rates are never going up! Wanna bet? Never is a LONG time.

Mon, 07/21/2014 - 16:30 | 4985099 hidingfromhelis
hidingfromhelis's picture

Calling it data is way too kind.  I prefer hedonically manipulated, seasonally adjusted, propagandized fabricated bullshit supporting a pre-determined conclusion.  Shoot, I'm probably being too kind as well.

Mon, 07/21/2014 - 17:13 | 4985268 sodbuster
sodbuster's picture

HaHaHa!! I stand corrected in a grand way!!! Thank you!

Mon, 07/21/2014 - 14:48 | 4984694 tarsubil
tarsubil's picture

When I read 4.3 percent growth, I laughed. Whatever, Krugman has lots of money but he looks like an unhappy freak. Whatcha gonna do?

Mon, 07/21/2014 - 15:04 | 4984760 Captain Willard
Captain Willard's picture

Exactly! I will take the "under" on both projections.

Of course, the debt forecast doesn't take into consideration the UNFUNDED entitlement programs, which are growing faster than nominal GDP growth currently and probably faster than the forecast too.

Mon, 07/21/2014 - 15:03 | 4984761 Captain Willard
Captain Willard's picture

Exactly! I will take the "under" on both projections.

Of course, the debt forecast doesn't take into consideration the UNFUNDED entitlement programs, which are growing faster than nominal GDP growth currently and probably faster than the forecast too.

Mon, 07/21/2014 - 15:16 | 4984808 QEternity
QEternity's picture

I think our Krugman is malfunctioning

Mon, 07/21/2014 - 15:19 | 4984820 Ariadne
Ariadne's picture

Looks like Jay Carney's propaganda writer was reassigned. Go union!

Mon, 07/21/2014 - 14:10 | 4984515 LasVegasDave
LasVegasDave's picture

1 rope + 1 lampost -1 NY Times economist = bullish

Mon, 07/21/2014 - 14:12 | 4984532 Dr. Richard Head
Dr. Richard Head's picture

I can't wait until I can go home and see that video on the internet, "2 bankers, 1 Rope"

Mon, 07/21/2014 - 14:29 | 4984594 whotookmyalias
whotookmyalias's picture

Winners of Nobel Peace Prize should not pontificate in areas where they lack expertise...or something like that

Mon, 07/21/2014 - 14:22 | 4984571 cougar_w
cougar_w's picture

Paul Krugman is a fatuous oaf so I fed him to my tiger:

Alert the Nobel committee!

Mon, 07/21/2014 - 14:29 | 4984599 MsCreant
MsCreant's picture

Your tiger will get gas, an inflated ego, and then become pretentious.

PETA will want a meeting with you about this. 

Mon, 07/21/2014 - 15:06 | 4984773 TMLutas
TMLutas's picture

Bring a bomb dog for the PETA meeting. 

Tue, 07/22/2014 - 01:36 | 4986823 Otto Zitte
Otto Zitte's picture

Bring a dope sniffing dog.

Mon, 07/21/2014 - 17:31 | 4985346 cougar_w
cougar_w's picture

Look, PETA gave me a down-vote over it.

You must excuse me now while I go commit suicide.

Mon, 07/21/2014 - 14:45 | 4984680 MsCreant
MsCreant's picture

Now that is a Nobel Prize winning formula for Economics.


Mon, 07/21/2014 - 14:10 | 4984520 astoriajoe
astoriajoe's picture

After the collapse, when municipalities can no longer afford to provide street lights, all alleys will be dark alleys, where I will look forward to meeting Mr. Krugman one day.

Mon, 07/21/2014 - 14:11 | 4984524 angel_of_joy
angel_of_joy's picture

Krugman is in the same category of idiocy as Obozo... and has a Nobel price to prove it, too.

Mon, 07/21/2014 - 14:32 | 4984617 daveO
daveO's picture

In my mind, Nobel awards became contrary-indicators in 1994.

Mon, 07/21/2014 - 14:13 | 4984531 Heavy
Heavy's picture

Save the bankers at your own peril.

Mon, 07/21/2014 - 14:13 | 4984536 CrimsonAvenger
CrimsonAvenger's picture

"an average growth rate of nominal GDP of 4.3 percent"


Mon, 07/21/2014 - 14:17 | 4984547 MidwestJester
MidwestJester's picture

Yeah, talk about rosy commentary!

Mon, 07/21/2014 - 14:25 | 4984579 cougar_w
cougar_w's picture

Somewhere beyond "rosey" is the realm of mind fuck.

Mon, 07/21/2014 - 14:38 | 4984632 MsCreant
MsCreant's picture

Dunno. Mind fuck implies he knows what he is doing and the deception is on purpose. It may have indeed started out that way, you know, lie a little bit, help the economy. But like the fed, the more you do, the more you gotta do. So instead of more printing to support the printing, we are talking about more lying to support the lying. Then his reputation is at stake. Then it gets interesting--cognitive dissonance. He starts to bridge the gulf between what he says and reality by believing it himself. Now we are talking delusional, as in stark raving batshit crazy, mad. No meds for this. Without the lies he is ontologically and epistemologically insecure. HE CANNOT BACKTRACK NOW!

Just a guess, ya know...

Mon, 07/21/2014 - 14:35 | 4984625 Dollarmedes
Dollarmedes's picture

As time goes on, and each quarter fails to reach the goal, we will be treated to stories of how "we can still make 4.3%...if only the next 12 quarters come in at 10.5%!"

Mon, 07/21/2014 - 17:05 | 4985233 Nick Jihad
Nick Jihad's picture

Never doubt the Hockey Stick.  Eternally one quarter away, but eternal nevertheless.

Mon, 07/21/2014 - 19:20 | 4985703 consider me gone
consider me gone's picture

For a minute I thought nobody had noticed

Mon, 07/21/2014 - 14:13 | 4984540 GOLD AND SILVER...


Mon, 07/21/2014 - 14:20 | 4984561 Eyeroller
Eyeroller's picture

and the horse you rode in on, SLUGMAN.

Mon, 07/21/2014 - 15:17 | 4984809 Ariadne
Ariadne's picture

Thats not a man baby.

Mon, 07/21/2014 - 14:20 | 4984556 JustObserving
JustObserving's picture

CBO's projections are worth far less than a bucket of warm piss.  In 2000, the CBO predicted a surplus of more than 3.5% of GDP for 2009.  We got a deficit of nearly 10%.

You have to be crazy or a delusional idiot to take any projection by the CBO as anything but a fantasy:


Mon, 07/21/2014 - 14:28 | 4984597 john39
john39's picture

yeah, but leave it to krugman to take it the next level of crazy...

Mon, 07/21/2014 - 14:19 | 4984557 gdiamond22
gdiamond22's picture are a chode, a chode I tell you

Mon, 07/21/2014 - 14:20 | 4984563 pods
pods's picture

Let's see what the projections are when the USD loses reserve currency status.


Mon, 07/21/2014 - 14:31 | 4984610 Stuck on Zero
Stuck on Zero's picture

Let's see what the projections are when the stock market drops 70%.


Mon, 07/21/2014 - 14:22 | 4984567 ObamaDepression
ObamaDepression's picture

This man is either insane or the worst apologetic Obama political hack EVER!

Mon, 07/21/2014 - 14:26 | 4984585 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

I don't see the either/or...  

Mon, 07/21/2014 - 14:26 | 4984587 cougar_w
cougar_w's picture

Why the or ?

Mon, 07/21/2014 - 14:34 | 4984622 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

That was some nice synchronicity sir.

Mon, 07/21/2014 - 15:46 | 4984916 Froman
Froman's picture

The latter; and fuck that socialist fish wrap the New York Times for giving this sociopath any ink or bandwidth.

Mon, 07/21/2014 - 17:09 | 4985255 Nick Jihad
Nick Jihad's picture

Rather, bless the NYT for publishing Krugman, thus giving fair warning to those who might otherwise be fooled.

Mon, 07/21/2014 - 14:24 | 4984578 I Write Code
I Write Code's picture

Krugman's a complete moron, like most these days at NYT.

Mon, 07/21/2014 - 16:59 | 4985212 eaglerock
eaglerock's picture

What I find the most vomit-inducing are the reader's comments on Krugman's articles.  Fawning, full of adulation.  Like a smarmy cult that feel that they are the only ones with the intellect enough to truly understand economics, laughing at all the poor commoners that aren't smart enough to follow his logic.   

Mon, 07/21/2014 - 14:28 | 4984592 MsCreant
MsCreant's picture

OT, but not:

Is Paul Krugman Leaving Princeton In Quiet Disgrace?

Mon, 07/21/2014 - 15:32 | 4984858 Miss Expectations
Miss Expectations's picture

That was very satisfying.  Thank you.

Mon, 07/21/2014 - 14:33 | 4984612 The_Dude
The_Dude's picture

Krugs has to be a pathological liar to continue to put this shit out and not vomit openly in public every time the bad taste of his lies and twisted logic bubble into his mouth....I often wonder how he could have been raised to generate this type of thinking?! 

Mon, 07/21/2014 - 14:31 | 4984614 ebworthen
ebworthen's picture

The bearded potato speaks!

O.K. kids, this means we can have 200% of income be debt!

This high form of math can only be understood by the most cultured amongst us.

Such as a corrupt government, or a PhD economist; "Lovely fabric Emperor, it shimmers!".

Mon, 07/21/2014 - 14:38 | 4984636 A Dollar Short
A Dollar Short's picture

Pure Bullshit Kruggery.

Mon, 07/21/2014 - 15:00 | 4984641 khakuda
khakuda's picture

CBO estimates have always been wildly optimistic and Krug knows this.  Go back 10 years or 20 years and look at the projections and they had nowhere near the amount of debt/debt growth that is now reality.

Mon, 07/21/2014 - 14:44 | 4984666 Seeking Beta
Seeking Beta's picture


Mon, 07/21/2014 - 14:45 | 4984672 Nue
Nue's picture

Krugman vs the CBO who's correct? Uggg I think my brain just tried to divide by zero.

Mon, 07/21/2014 - 14:46 | 4984682 MsCreant
MsCreant's picture

Your avatar is a good one for this.

Mon, 07/21/2014 - 14:45 | 4984674 QQQBall
QQQBall's picture

Right. All the CBO assumptions have been so accurate in the past.

Mon, 07/21/2014 - 14:59 | 4984744 trillion_dollar...
trillion_dollar_deficit's picture

Since 1980, there have been nine years where GDP grew over 4.0% AND it has not happened since 1999. 

Mon, 07/21/2014 - 15:02 | 4984752 wagthetails
wagthetails's picture

"Debt held by Public", Did they just delete the debt held by fed? That was easy.

Mon, 07/21/2014 - 15:07 | 4984783 B.J. Worthy
B.J. Worthy's picture

If we can just print our way out of any problem, why pay taxes?

Mon, 07/21/2014 - 15:13 | 4984804 cougar_w
cougar_w's picture

The printed money is given to the free shit army. The real money they keep for themselves.

Notice, all you get either way is the bill.

Mon, 07/21/2014 - 15:11 | 4984792 Itchy and Scratchy
Itchy and Scratchy's picture

Ok let's see if I got it? If you owe lots of $$$ that's good ... and if you don't owe and lend that's bad! Good news!

Mon, 07/21/2014 - 15:12 | 4984799 cougar_w
cougar_w's picture

But what did the CBO get from reading chicken entrails? I seem to have missed that chart here. Or do they employ the cow-plop-bingo model for GDP? It's complicated so I forget which it is.

Mon, 07/21/2014 - 15:12 | 4984801 RaceToTheBottom
RaceToTheBottom's picture

Economics cannot maintain it's facade of not being a enrichment vehicle for the wealthy.  It is not anything like normally distributed in helping the US populace...

Mon, 07/21/2014 - 15:20 | 4984826 B.J. Worthy
B.J. Worthy's picture

The funniest/most depressing thing I've seen all day.

Intro screen to the 1987 movie The Running Man:

Mon, 07/21/2014 - 15:27 | 4984847 earnulf
earnulf's picture

Oh, I see. Instead of reporting the ENTIRE federal debt, we just count the PUblic portion as to the percentage of GDP,after we of course, "adjusted" the GDP for Hookers and Blow and anything else!

In what Universe is 17.5 Trillion dollars in debt worth only 2% interest?  (That's a cool 350 Mil per year or about 12% of the total revenue generated).

Heck at 4%, a quarter of our taxes go for nothing but Interest!~

And at the "normal" 6% (Long Term average), a third is interest!

We are so F***ed

Mon, 07/21/2014 - 15:39 | 4984893 mastersnark
mastersnark's picture

Have to admit I was concerned DC was heading into a debt spiral or debt explosion or some other debt [bad thing]. Thankfully, this report by DC predicts aka "dictates" an avg 4.1% interest rate for next 25 years. #CrisisAverted

Mon, 07/21/2014 - 15:45 | 4984912 yogibear
yogibear's picture

The Nobel prize people must be doing drugs. Greater the lunacy the greater the chance for a prize

Mon, 07/21/2014 - 15:55 | 4984962 GoldenDonuts
GoldenDonuts's picture

Maybe I'm wrong but doesn't a growth figure of 4.3% mean fantastic growth in ANY developed economy.  So an average of 4.3% growth over the next 25 years seems wildly unrealistic to me.   Could the person who wrote that possibly be dependant on a rosy outlook for his / her income?

Mon, 07/21/2014 - 16:40 | 4985137 Spungo
Spungo's picture

Krugman is right to say America's debt problem is not like Greece. Greece can't print money, so their budget problem leads to bankruptcy. Our debt problem can be paid by printing money, so our problem leads to inflation and possibly hyperinflation. 

Mon, 07/21/2014 - 16:54 | 4985190 Spungo
Spungo's picture

I can't help but think all or most of the people wanting high inflation are racists. I say that because high inflation often leads to ultra-nationalist political movements, racism, xenophobia, and sometimes genocide. The people calling for inflation know this. We can even see this starting to happen in Europe. Extreme right wing political parties are forming as rising food and energy prices are destroying people. People are demanding closed borders and tougher laws against immigration. As inflation gets worse, people will be a lot more eager to kill whomever gets blamed for the stagflation. If I were a dictator and I wanted to exterminate a large group of people, I would start by causing high inflation and blaming it on that group of people.

Mon, 07/21/2014 - 17:28 | 4985332 cougar_w
cougar_w's picture

You may be correct about the confluence of the two events. That's something I'd never given any notice to until you mentioned it. Likewise deflation probably aids the Socialists in their bid for power.

But I don't think either group is in a position to foster these kinds of swings themselves, even if it helps them. After all they are fringe elements by definition, and neither extreme are the darlings of the oligarchs who clearly want to keep power to themselves. But yeah the fringe elements are right there ready to take advantage.

An interesting thought.

Mon, 07/21/2014 - 17:26 | 4985317 homiegot
homiegot's picture

Well, shit. If Krugman likes it, says everything is OK, I'm good. Can't argue with a Nobel Economics Prize winner.

Mon, 07/21/2014 - 18:05 | 4985430 Atomizer
Atomizer's picture

Krugman needs to have his head slammed on a mahogany desk a few times. Pull him up by the back of his hair, ask him to take a look at the chart again.

When he refuses to equate 2+2 = 4, another head slamming secession with wood desk to skull. 

Mr. Krugman, what does 2+2 equal? Reply, 'It equals five.' More krugman head pounding ensues. 

Mon, 07/21/2014 - 19:09 | 4985662 Big Ben
Big Ben's picture

These projections seem to be based on the assumption that there will be no economic downturns between now and 2039 and that real interest rates will remain near zero the entire time. Right!

Compare the CBO's deficit projections made in 1999 and 2007 to what actually transpired.

The CBO is projecting unsustainable deficits even in the most optimistic case imaginable.

Mon, 07/21/2014 - 19:36 | 4985765 SweetDoug
SweetDoug's picture




I think the CBO is lowballin'!


Okay! Let's cut the debt. We're 17 trill + in the hole. The deficit is 500 billion according to recent news… I doubt it.

So! This should be easy! Let's chop another trillion from our budget, and put it towards the debt.


That way, about 18 years, if rates don't go up and we don't go into deficit spending, it'll be paid off.


Simple! Vote for SweetDoug!





Mon, 07/21/2014 - 21:12 | 4986131 mark mchugh
mark mchugh's picture

Somebody should explain to Krugnuts that accidentally sitting on a calculator produces more accurate estimates than the Congressional Budget Office.  

In 1999, the CBO predicted that Federal Debt held by the public would be $941 Billion in 2010 (it turned out to be $9.4 Trillion).

(page xvi).


In 2000, the eggheads at MIT (where Krugnuts was spawned), ran this story in their campus newspaper:

Clinton Proposes Eliminating Debt by 2013 in Next Budget

President Clinton said Tuesday that the budget he will send Congress Feb. 7 will propose paying off the entire $3.6 trillion national debt by 2013 -- two years earlier than had been expected even a few months ago.

At a news conference, the president attributed the opportunity for a speedup to an economy that is even stronger than had been forecast, resulting in higher tax revenues and lower expenses, and to his own austere budget policies.

At the same time, the nonpartisan Congressional Budget Office issued revised estimates projecting that the federal budget surplus over the next 10 years is likely to top $1.9 trillion -- substantially larger than it had predicted as late as last December.

The joke here of course is that there are still people out there stupid enough to believe anything the CBO says.

Here's a chart showing percentage growth of GDP vs. Federal debt held by the public:

Since 2008, these morons increased the debt 133% to produce 15.2% GDP growth.  With Krugnuts waiving pom-poms the whole time.



Tue, 07/22/2014 - 02:04 | 4986854 bentaxle
bentaxle's picture

Excellent! + 1000

Mon, 07/21/2014 - 21:51 | 4986284 oudinot
oudinot's picture

The debt to GDP ratio should include all debt:  its 74% when you don't figure in the $5 trillion or so the government has borrowed from Social Security. When you add that in the ratio is 104%, a more accurate measure of federal indebtedness.



Tue, 07/22/2014 - 01:57 | 4986845 hedgiex
hedgiex's picture

Perhaps only China will cheer Krugman on to get this internal debt  fossilized into a structural dead weight for the economy while awaiting for the Global Oligarchs out of their special love for US shall invest long term to grow the GDP to wipe out the debts soon.

China too has domestic debt to GDP of close to 200% and they are embracing K's cure ? Concurrently they have a large foreign reserves predominantly in US$. They also have a special love for US to even keep the US$ when their debtor is piling more debt, be they internal or external ?

So China (second largest economy) and other creditor nations do not matter in K's navel gazing model ? Is K betting that China goes down first b4 US ?  The whole game change when EC beats both of them in the race.

Tue, 07/22/2014 - 09:50 | 4987547 StrikerMax
StrikerMax's picture

Great analysis !


" ... Most of Krugman's readers wont see it " ... I would say that by now Most if not all of Krugman's followers don't know how to read ... those who do don't understand what they read or have a serious case of functional iliteracy ...

In both cases they are clearly financial iliterates.

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