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Guest Post: “Nobody understands Debt (But Me)”

Tyler Durden's picture


From Alexander Gloy of Lighthouse Investment Management

"Nobody understands Debt (But Me)"

Luckily they are easy to spot: the demagogues, the manipulators and the hired claqueurs. Unfortunately, there is no lack of media willing to provide a platform to perform their insidious game.

Take Nobel-prize wielding economist Paul Krugman. In an article for the New York Times (“Nobody understands debt”) from January 1, 2012, he writes:

“Through most of 2011, as in 2012, almost all of the conversation in Washington was about the allegedly urgent issue of reducing the budget deficit.”

His opening gambit: a reduction of the budget deficit is not an urgent issue. Really? The US has reached 100% debt-to-GDP, and each year another 10%-points get added to the pile. Those $15 trillion exclude a vast array of debt from quasi-governmental organizations (FannieMae, FreddieMac, etc) and unfunded liabilities (Medicare, Social Security, Veterans’ benefits) resulting in a total debt of $61.6 trillion, as per the Heritage Foundation. This explains Krugman’s disdain for the institution, as we will see below. He continues:

“This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans.”

Krugman tries to portray those who are trying to save the country by reducing spending as heartless and mean-spirited people, when those attributes should apply to those who applauded spending future generations’ taxes to the point of collapsing the financial system. To add insult to injury:

“When people in [Washington] D.C. talk about deficits and debt, by and large they have no idea what they’re talking about.”

He brings out the “I know better – I have a Nobel prize” argument. And the reasoning:

“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.”

This is right in line with those people who, back at the height of the housing boom, ridiculed anyone warning about dangers of a possible fall in housing prices. Only because riding your bike with your hands up in the air went smoothly for 10 seconds doesn’t mean you will make it in one piece over the pothole. Krugman’s rhetoric matches that of a mayfly rejecting the possibility she might die at the end of the day because so far the sun has never set during its life.

Could the international financial crisis have led to a flight to safety into US Treasury bonds? Could the trillions of Fed buying have helped? Could the largest non-official buyer of Treasuries (Cayman Islands) be hedge funds looking for a cheap way to “hedge” stock market risk, because, in a twisted way, they rely on negative correlation between stocks and bonds (if one goes up, the other one goes down) to continue ad infinitum? Where else are the Chinese going to put their trillions of foreign exchange assets accumulated by holding the Yuan down? In the crumbling Euro? Back to mayfly Krugman:

“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.”

If anything, the size of the debt problem is underestimated. It is amazing to see how the problem (too much spending leading to too much debt) is being turned around 180 degrees into “the problem is too little spending”.

“Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing.”

Paying back debt doesn’t impoverish; spending money you don’t have does. But Mayfly doesn’t relent and tries to spell it out in simple terms for the average American:

“They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments. This is, however, a really bad analogy in at least two ways. First, families have to pay back their debt. Governments don’t – all they need to do is ensure that debt grows more slowly than their tax base.”

Exactly. Let’s look at how US GDP and debt have developed over the last 46 years:

Debt caught up with GDP, reaching 100% in Q4 2011. Debt (taking only the “on-the-books” part) is growing faster than GDP.

Over the last three years, US debt has grown by roughly $4 trillion , while GDP has grown only by $1 trillion. One additional dollar of debt has led only to 25 cents additional GDP. This is the “marginal utility of debt” (how much you get out of an additional dollar of government spending). At elevated debt levels, debt service (interest and redemptions) carves out an increasingly high share of tax revenue, leaving less for productive uses.

The lower chart shows rolling 3-year periods for growth in GDP and debt as well as the resulting ratio (marginal debt utility). It has almost reached zero. Granted, the increase in government debt has partially been “diluted” by a deleveraging of the private sector. Still, 2012 will be the fourth year in a row with a budget deficit exceeding $1 trillion. Continuing this pace, combined with a marginal debt utility of 0.25 would get the US to a Greece-like 143% debt-to-GDP ratio within 9 years. But Mayfly tells us we don’t understand.

“We need more, not less, government spending to get us out of our unemployment trap. And the wrong-headed, ill-informed obsession with debt is standing in its way.”

How can a Nobel-prize carrying economist, who is presumably smart, write such nonsense? “He knows better”, says Jim Rickards (author of “Currency Wars”). And that makes Krugman so dangerous. Decision makers will reference his “debt does not matter” mantra over and over again – until it’s over. Thank you, Mayfly. You really understand debt – and how to make others believe it doesn’t matter.


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Mon, 02/06/2012 - 11:36 | 2130632 francis_sawyer
Mon, 02/06/2012 - 11:42 | 2130655 whstlblwr
whstlblwr's picture

Change registration Republican today for super Tuesday vote in a month. Call friends in these states to vote for Ron Paul. Maybe use standard politics and go to senior home to talk of Ron Paul and take voter registration cards with you. For any who say he’s not electable, look at this video. Ron Paul’s already changed primary elections with focus on delegates. First time I see news media report about delegates. Now Gingrich says getting delegates is his strategy too. They follow lead of Ron Paul.
March 3, 2012

March 6, 2012 (Super Tuesday)
North Dakota

March 10, 2012
U.S. Virgin Islands

March 13, 2012

March 17, 2012

March 18, 2012
Puerto Rico

March 20, 2012

March 24, 2012

Mon, 02/06/2012 - 11:54 | 2130693 redpill
redpill's picture

Nobel Prize?  OHHH you mean the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel that is really not a Nobel Prize at all and is sponsored by the oldest central bank on the planet?  Shocking that someone recognized by such an institution would be in favor of money printing and endless debt slavery.

Mon, 02/06/2012 - 12:02 | 2130722 WestVillageIdiot
WestVillageIdiot's picture

You are right.  The voodoo practice of economics had to pay out money to create a prize to try to prove that it has some legitimacy.  The Teen Choice Awards have more credibility than this flaming pile of shit.  But most people only read the headlines so they think this is actually a real prize. 

"And this year's winner of the award in the field of excellence is Paul Krugman.  Presenting the award will be last year's winner, Homer Simpson."

Mon, 02/06/2012 - 12:14 | 2130758 JW n FL
JW n FL's picture







The Federal Reserve collects enough in interest payments from Private Debt that the public debt should be a wash.


Why is NO! ONE!! Talking about what the Federal Reserve Earns in Interest Payments from the Banks of the World!

Why is no one mentioning that given the 6% in earnings that the FED Share Holders Earn.. should be more than enough to right ALL of the WALL STREET BANKS?


How come NOT! one person has bothered to line item the FED's earnings?




Must I do everything?

Mon, 02/06/2012 - 12:18 | 2130771 JW n FL
JW n FL's picture



The Month in Review
A recap of last month's articles & documents   JUMP TO:
News Article Recap
Conference Update
Document Recap       OffshoreAlert monitors individuals, businesses and important events regarding the offshore world. Once we find out about something of material importance, subscribers are notified about it shortly afterwards. Click here to learn more about gaining Unlimited Access to the Largest Offshore Database For Less Than $2 per Day.       NEWS ARTICLE RECAP Jonathan Curshen faces up to 20 years in prison after Florida jury convicts him of securities fraud and money laundering
February 03, 2012 - Jonathan Curshen, a former offshore financial services provider and Honorary Consul to Costa Rica for St. Kitts & Nevis, has been convicted of securities fraud for the second time in two-and-a-half-years.

Swiss private bank Wegelin & Co. indicted in U. S. for allegedly conspiring to defraud the IRS
February 02, 2012 - Switzerland's oldest private bank, Wegelin & Co., was indicted today in the United States for allegedly conspiring to defraud the IRS and, in a parallel civil action, had $16 million seized at its correspondent bank, UBS AG, due to alleged money laundering.

Ernst & Young (Cayman) current & former partners settle litigation with Cash 4 Titles 'investor' Lewis Rowe
January 27, 2012 - A legal dispute in the Cayman Islands in which current and former Ernst & Young partners Dan Scott, James Cleaver and Richard Fogerty were accused of illegal conduct towards Lewis Rowe over his alleged participation in a Ponzi scheme known as Cash 4 Titles has been settled.

Credit Suisse (Guernsey) and trust officers accused of concealing proceeds of corruption by Ukraine politicians
January 17, 2012 - Credit Suisse (Guernsey), three of its trust officers and a BVI-domiciled IBC are being sued for allegedly concealing the proceeds of a corruption by former Ukraine Prime Ministers Pavlo Lazarenko and Yulia Tymoshenko and avoid paying debts, including an $18 m judgment. At least $2.6 m in "bribes" went into accounts at Barclays Bank, in the Cayman Islands, it was alleged.

Ex-owners of Clarendon Insurance seek to enforce $92 m Bermuda judgment regarding Stirling Cooke fraud
January 10, 2012 - The former owners of the Clarendon Insurance Group have taken legal action to force Travelers Indemnity and Executive Risk Specialty Insurance to satisfy $25 m of a $92 m judgment in Bermuda arising from a fraud committed by the now-defunct, Goldman Sachs-controlled Stirling Cooke group.

Bahamas-domiciled Gemini Investment Fund and IBCs in BVI and Panama 'used for $183 m fraud'
January 09, 2012 - Bahamas-domiciled Gemini Investment Fund, which is administered by Trident Corporate Services, and IBCs in the British Virgin Islands and Panama were used launder $183 million from two frauds perpetrated against the Russia-based Otkritie financial group by London-based trader Georgy Urumov, it has been claimed.

Bancroft Life's fired managers must return records and 'cease interfering' with relationships, rules US Court
January 07, 2012 - The U. S. Court of Appeals has upheld a lower court's decision ordering the former managers and professional advisors of offshore insurer Bancroft Life & Casualty to return its "corporate books and records" and "cease interfering" with the insurer's relationship with its insureds.

Antigua police appeal to former diplomat Sir Ronald Sanders to co-operate with corruption investigation
January 04, 2012 - The Royal Police Force of Antigua and Barbuda has issued a public appeal to the country's former Ambassador to the United Kingdom – Sir Ronald Sanders – to co-operate with a corruption investigation in which he is a suspect.

Swiss bankers indicted for conspiring to defraud IRS while working for Wegelin & Co.
January 03, 2012 - Three former client advisers with Swiss bank Wegelin & Co. - Michael Berlinka, Urs Frei and Roger Keller - have been indicted in the USA for allegedly conspiring with U. S. taxpayers and others to conceal more than $1.2 billion from the IRS.

Insolvent Bahamas insurer sues former directors over 'dubious' Florida property deals
January 03, 2012 - The court-appointed managers of Bahamas-domiciled British American Insurance Company Ltd., which operated throughout the Bermuda-Caribbean region, are suing the insurer's former directors and others for 'recklessly gambling away' hundreds of millions of dollars on 'speculative' Florida real estate investments.       GET FREE INSTANT EMAIL ALERTS
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Mon, 02/06/2012 - 13:34 | 2131020 JW n FL
JW n FL's picture

A Rothschild Speaks on the idea of Developing One International Currency


Mon, 02/06/2012 - 14:58 | 2131281 JW n FL
JW n FL's picture



Federal Reserve Earnings verse Federal Reserve Loans to the United States of America



1.    How much does the Federal Reserve Bank Earn in Interest Payments? From anyone other than the United States of America.


Federal Reserve $15 Trillion Dollars in Loans Bloomberg


Loans from 3 / 9 / 2008 to 3 / 9 / 2009 totaling $15,760,004,161,955.00


Getting Bigger

Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.

Total ** assets ** held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data

** **


The Fed’s Secret Liquidity Lifelines




2.    Who are those Monies Participated Out too? That the Federal Reserve Bank Collected?

Who owns the Federal Reserve?

The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.

As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

However, the Federal Reserve is subject to oversight by the Congress, which often reviews the Federal Reserve's activities and can alter its responsibilities by statute. Therefore, the Federal Reserve can be more accurately described as "independent within the government" rather than "independent of government."

The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.



So! The question stands.. if the Federal Reserve is collecting .25% interest on $100 Trillion Dollars a Month.. Where Does ALL!! That Money Go?!?!?!?!?!

6% here.. 6% there.. Participated Out to the Shareholders.. into their Federal Reserve Bank Accounts.


Mon, 02/06/2012 - 13:43 | 2131049 rayduh4life
rayduh4life's picture

How many times did we here it during Regans' big run up in the national debt that "debt doesn't matter"  How many times did Cheney say "Regan proved debt doesn't matter"?  What ever. 

Right or wrong, debt only seems to be a problem when democrats are in the white house. 

I'm not saying Krugman is right but I'd rather "owe them" than they "owe me".  As for foreign ownership of all that debt, if you owe the bank a thousand bucks, you're in trouble - if you owe the bank a million bucks, the banks in trouble.  And lastly, name a country that paid off all it's debts?

Rant over appologies to the offended.


Mon, 02/06/2012 - 17:45 | 2131990 JW n FL
JW n FL's picture




The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year. 

Mon, 02/06/2012 - 19:30 | 2132292 thewhitelion
thewhitelion's picture

@JW n FL  Must you say the same thing repeatedly?

Mon, 02/06/2012 - 19:32 | 2132301 JW n FL
JW n FL's picture




Until it sinks in.

Mon, 02/06/2012 - 13:55 | 2131085 SAT 800
SAT 800's picture

Yes. Yes. Yes. Spin spins on. "most people only read the headlines"; yes. yes. And having ascertained that, the rest of the modern world follows logically; consensus manufacturing; it's so much nicer than propaganda. When I tell people that he did not win a Nobel Prize, (which because that "phrase" has a meaning which is consistent for everyone, and is "understood"; is correct; it is not a Nobel Prize); they look at me like I'm a crazy person. Or, if they've spoken to me before, they may say, "oh, you always make such outlandish statements". Al Gore is a Climate Scientist. Did you know he was a theological student who dropped out without graduating? NO, you didn't. Why? It doesn't fit in the media. "The Science is settled"; well the last time the science was settled it was called the Luminiferous Ether. For the science on this question, please Rogoff's book, "it's different this time"; it's a very good book.

Mon, 02/06/2012 - 13:26 | 2130979 TruthInSunshine
TruthInSunshine's picture

Krugman's 'interest rates aren't soaring' argument is incredibly fraudulent.

The reason why interest rates are not soaring (yet) is because Bernanke & the boys at the Federal Reserve have been buying a massive bulk of USTs, on the United States credit card (read more debt accumulation - I challenge Krugman to explain how this is not so), artificially driving interest rates on those same USTs lower and lower (as well as all competing asset class yields), and Bernanke has simultaneously pushed the FOMC ZIRP pedal to the metal.

I'd wonder if Krugman would argue that this can go forever.

Let's see the Federal Reserve back off UST purchases, for at least an 18 month period, and check where UST yields are compared to now.

Let's see Fed not buy any USTs for at least 48 months, and check the yields on USTs.

I wonder if there's any level of debt accumulation or deficit spending that Krugman whereupon Krugman woudl say:  "Now wait a minute, this is getting to be excessive..."

Is there any point at which he would begin to warn of the hazards of such deficit spending and aggregate debt levels?


He's an outright fraud. That he knows that the primary reason "interest rates haven't risen" is because the Fed is monetizing U.S. deficit spending (approximately 1.9 trillion in the last 24 months), yet uses this as his basis for claiming for minimizing hazards associated with our current fiscal path, let alone the apparently more reckless one he'd like for us to embark upon, is nothing SHORT OF INCREDIBLE.

Krugman's entire argument this time alleges there's no bubble in the UST market BECAUSE interest rates haven't risen as of yet, even though the primary reason interest rates haven't risen is because of the Fed is an artificial actor intervening in a historically inprecedented way, to precent them from rising.

Let's just let Krugman go nuts and lets have the Fed buy another 2 trillion - no - 30 trillion - in USTs, yielding nothing, and lets cut the discount rate to O% with an announcement it will be official policy until 2050. What could possibly go wrong since nothing will go wrong based on what the Fed has already done vis-a-vis UST (and all yield bearing asset class) markets.


Mon, 02/06/2012 - 13:36 | 2131026 redpill
redpill's picture

Interest rates haven't gone up for the same reason the Chinese yuan hasn't appreciated.


There are always vocal fans of price fixing until reality reasserts itself.  And it always does, it's only a matter of time.

Mon, 02/06/2012 - 17:52 | 2132019 JW n FL
JW n FL's picture

A Rothschild Speaks on the idea of Developing One International Currency


The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.



Mon, 02/06/2012 - 13:45 | 2131056 hannah
hannah's picture

'...because Bernanke & the boys at the Federal Reserve have been buying a massive bulk of USTs,'


truth - what do you define as massive...91%....heck i aint worried til theybuy 97% or 98%. 91% isnt that much....?

Mon, 02/06/2012 - 13:59 | 2131093 SAT 800
SAT 800's picture

An outright fraud compared to who? James Hansen? Barrack Obama? Larry Summers? These are all people who live in little self-referential worlds; they don't need no "steenkin education"; they already know the answer. Power corrupts, and absolute power corrupts absolutely.

Mon, 02/06/2012 - 23:18 | 2132807 TruthInSunshine
TruthInSunshine's picture

An outright fraud in the world of academia.

It's incredible that Krugman serves up a claim that interest rates haven't risen as proof of his contention that taking on more debt, regardless as to how much debt we already have, is a harmless idea, let alone a good one, when he knows an artifice of unprecedented federal reserve interventionism, and not market forces, is the only reason interest rates haven't risen.

When they do, I want to see Krugman literally eat an entire crow.

Mon, 02/06/2012 - 14:33 | 2131187 Hedgetard55
Hedgetard55's picture

The day the
FED even hints at tightening is the day that makes Black
Monday, Tuesday and Friday look like a picnic.

Mon, 02/06/2012 - 16:22 | 2131638 Totentänzerlied
Totentänzerlied's picture

Krugman's intended audience is the class of Americans - mainly east and west coast liberal élite - whose politics align with those of the NYT and who (would) benefit from the economic policies he prescribes and do benefit from ZIRP, QE4Eva, massive deficit spending & stimulus, etc.

He is nothing more than a credentialed establishment sycophant/mouthpiece for the economic agenda of the NYT and its readership. Just like every other NYT columnist, he exists to toe the editorial party line. Viewed in this light, everything he says and writes makes utterly perfect sense. He's a puppet-prophet of neo-Keynesianism, interpret his words accordingly.

Mon, 02/06/2012 - 12:18 | 2130772 battle axe
battle axe's picture

Stalin, Stalin, Stalin...Lets dig him up and give him a chance. 

Mon, 02/06/2012 - 12:56 | 2130791 LouisDega
LouisDega's picture

Travis Bickles reply... "Damn!!" ( Hitting his head in disbelief) .......  "Damn!!"

Mon, 02/06/2012 - 11:42 | 2130657 MillionDollarBonus_
MillionDollarBonus_'s picture

I love watching discredited, intellectually inferior libertarians squirm after being totally HUMILATED by top Nobel Prize winning economists. Dr. Paul Krugman is absolutely right - interest rates are at RECORD LOWS. Where's the collapse that libertarians have been predicting? Where's the 'collapse' in housing prices? I'm still waiting.  

Mon, 02/06/2012 - 11:44 | 2130664 HyperLazy
HyperLazy's picture

Keep waiting and thou shalt be rewarded. ;)

Mon, 02/06/2012 - 14:17 | 2131132 economics1996
economics1996's picture

6 million homes in foreclosure and record low sales in new home construction, employment levels not seen since Clinton, record deficits, European bankruptcy, and MDB is asking Libertarians what?

Mon, 02/06/2012 - 11:47 | 2130670 homersimpson
homersimpson's picture

You talk too much for a guy who already forgot about 2008, 2005, 2001, etc. etc..

Get your head out of arse and stop soundling like a rookie real estate agent.

Just because a bubble hasn't popped due to artificial means in the past 4 years doesn't mean one isn't around the corner. Yes - more debt and money printing - always good for the economy *rolls eyes*

Mon, 02/06/2012 - 11:59 | 2130711 WestVillageIdiot
WestVillageIdiot's picture

Homer, you should be able to recognize that MDB is constantly being sarcastic and trying to get a rise out of people. 

I have no doubt that he understands what is behind the Krugman's of the world.  It is all ego.  Krugman got into the religion of debt and found that it was a world in which he could shine.  He could become a high priest.  This is a guy that probably got picked last in kickball, football, softball, basketball and suddenly he found something where he could get picked first.  That is why he embraces his debt message so gladly and with such zeal. 

The further down the debt wormhole we get the more guys like Krugman have to keep convincing themselves that they are right.  Like the priests of the middle ages they must burn more people at the stake of debt.  They must dump more heretics into the rivers of debt they have helped create. 

It can't be easy to be 60, or however old Krugman is, and realize that he should have been picked last in economics, the same way he was passed over for Suze Kowalski on dodge ball day. 

Mon, 02/06/2012 - 12:34 | 2130816 Buckaroo Banzai
Buckaroo Banzai's picture

Indeed. MDB is one of our most valued trolls. Let us celebrate his trolldom!

Mon, 02/06/2012 - 13:11 | 2130922 oldman
oldman's picture


the bubble has popped, so you can quit waiting for it. And as long as you pay your taxes and vote for the 'new edition', the dudes will continue to pay the the losers and liars your money to pretend that the game is still on; it is not.
it is tiring, however, to go through this blog and others daily and see and read what people's opinions of history and the future are, but rarely see or read about anything that is happening in the present-----how can there be no news? (thanks, ZH for the story on the BDI where's the rest?)

I have spent nearly two months away from all of this, but the bubble has popped. What now----do we keep waiting for something to happen as we vote for the new edition and stuff our tax dollars into the pockets of those poor bankers?
I think so----om

Mon, 02/06/2012 - 11:46 | 2130672 CPL
CPL's picture

Reinstate Mark to Market as removed by FAS and we'll talk about reality then.

Mon, 02/06/2012 - 11:52 | 2130692 Captain Kink
Captain Kink's picture

Add the debt of the individual states to the number and what's our debt to GDP?  We are already Greece.

Mon, 02/06/2012 - 12:38 | 2130829 MachoMan
MachoMan's picture

First, these figures are with a completely fudged gdp...  the real intersection was probably long, long before q4 2011...

Second, who the fuck cares about debt to gdp?  What is our marginal ability to collect tax revenue?  How do we generate enough return to pay for the juice on what we borrow (and have borrowed)?  We keep printing to generate a fraction of every dollar of new debt?  Are we planning on making that shit up on volume or what?

Third, we're not greece...  we're a whole different level of risk...  greece is just the staging ground for the destruction of the world's most prolific currencies/economies, given the interconnected nature of world trade and economies.  The battle isn't over greece per se, it's over the whole ball of wax.  Practically speaking, I'm not sure it's even possible to really calculate the relative financial condition of the various debtor countries...  I don't see much standardization in accounting methods and I also see plenty of off balance sheet shenanigans...  thus rendering the basic analysis pointless (presuming you can even get to all the source documents).

Mon, 02/06/2012 - 15:06 | 2131319 cranky-old-geezer
cranky-old-geezer's picture



Keep going, add debts of county and city governments.

Wana know why your taxes are so high?  There it is.  You're paying interest on federal debt, state debt, county debt, and city debt ...and school district debt too probably.

Mon, 02/06/2012 - 12:07 | 2130734 resurger
resurger's picture

reinstate mark to market! MTM will be history CPL

Just wait for 2013 with the new FASB & IAS New accounting standards, you will be amazed


Mon, 02/06/2012 - 11:51 | 2130687 Surly Bear
Surly Bear's picture

I love watching discredited, intellectually inferior libertarians squirm after being totally HUMILATED by top Nobel Prize winning economists. Dr. Paul Krugman is absolutely right - interest rates are at RECORD LOWS. Where's the collapse that libertarians have been predicting? Where's the 'collapse' in housing prices? I'm still waiting. 

You are the most uneducated individual in the history of the world. I know for a fact you're an idiot because if you had ever done any work with the classical or keynesian theories you would know that their models do not answer every circumstance observed in the real world. From my studies at the university, I do not think we really understand everything, and the reason for that is people are not rational. That is, they do not behave according to mathematical models. Please, for the love of god, shut the fuck up.


Mon, 02/06/2012 - 12:06 | 2130731 WestVillageIdiot
WestVillageIdiot's picture

I believe has Sarcasm Detectors on sale this week.  MDB is always tongue-in-cheek.  It is funny how easy it is for us to get mad when we read something we don't like.  Don't get me wrong.  I fall for it, too.  But I've seen him enough to know that he is just trying to act like somebody that is plugged into the system. 

Read MDB as comedy and you will understand his posts better.

Mon, 02/06/2012 - 12:57 | 2130875 Surly Bear
Surly Bear's picture

You are correct, and I bow to you.

Mon, 02/06/2012 - 13:17 | 2130948 Blano
Blano's picture

It's happened to all of us the first time or two we read his schtick.

Mon, 02/06/2012 - 14:07 | 2131113 SAT 800
SAT 800's picture

On the other hand, I know for a fact that I can go out and find two middle aged American citizens who agree completely with the post; and would probably be willing to generate something similar spontaneously; Never under-estimate the ignorance of the American Citizen.

Mon, 02/06/2012 - 16:40 | 2131700 Totentänzerlied
Totentänzerlied's picture

Yep, we've all heard "but Paul Krugman said in the Times last week that ... " from some dutifully misinformed and ignorant acquaintance/friend/family member.

And not as in "Krugman said it so we can know with certainty that it's nonsense unworthy of the ink in which it was written."

When respected (not by me) publications publish the proselytizing of clowns like Krugman, they commit the journalistic and intellectual capital crime of tricking the reader into affording the material presented a vastly greater degree of credence and credibility than it merits - if this guy wrote it and the Times published it, it must be true!

Et voila, consent manufactured.

Mon, 02/06/2012 - 11:54 | 2130694 Clueless Economist
Clueless Economist's picture

Thank You Mr M $ Bonus for admitting my superior intellect!

"The only solution to the debt problem, is more debt"

P. Krugman


New York Times Writer

Ivy Leaguer

Nobel Winner

All-around Douchebag

Mon, 02/06/2012 - 12:07 | 2130733 WestVillageIdiot
WestVillageIdiot's picture

I believe "Ivy Leaguer" and "all around douche bag" are a redundancy.

Mon, 02/06/2012 - 12:55 | 2130870 WALLST8MY8BALL
WALLST8MY8BALL's picture


Mon, 02/06/2012 - 14:10 | 2131118 SAT 800
SAT 800's picture

they all learn to play something called "squash" and join Fraternities, and this contributes to their "tendencies"; but I agree with you.

Mon, 02/06/2012 - 13:56 | 2130867 Dr. Engali
Dr. Engali's picture

There are very few avatars in this forum that makes me want to throw up. Yours just happens to be one of the.m

Mon, 02/06/2012 - 11:55 | 2130696 EvlTheCat
EvlTheCat's picture

Please don't feed the troll!

Mon, 02/06/2012 - 11:57 | 2130701 BandGap
BandGap's picture

I'm looking forward to making money by sending ships I don't own hither and yon. Same kind of thinking.

Mon, 02/06/2012 - 11:59 | 2130709 Clayton Bigsby
Clayton Bigsby's picture

Did you actually read the article?  Do you understand the structural forces at play?  Do you understand why rates are at "record lows"?  Do you understand the costs this imposes upon society?

It is simply amazing to me that people like you hide behind the imprimateur of Krugman's "nobel prize", and this somehow makes the laws of reality (i.e. solving too much debt with more debt) not apply to you.

This isn't ideology, genius - it's arithmetic and common sense.  Let me explain it to you thus - Debt doesn't matter... until it does, and nothing is free.  There are costs to accumulating such a massive debt pile and just because they are hidden from you does not mean they do not exist.

Mon, 02/06/2012 - 12:19 | 2130768 MillionDollarBonus_
MillionDollarBonus_'s picture

"There are costs to accumulating such a massive debt pile ... "


Er ... did you not hear what I said? Interest rates are at RECORD LOWS. You know what doomers like you could be doing instead of hiding in your underground bunkers and whining about Armageddon like insane lunatics? Taking out consumer loans and actually HELPING the American economy. Libertarians are a bunch of spoiled brat whiners in a nation of largely patriotic and sensible consumers just going about their daily shopping and doing their part to boost the economy.


Mon, 02/06/2012 - 13:00 | 2130888 moroots
moroots's picture

What were you, born yesterday?  Did you miss the entire NASDAQ bubble episode?  Or how about the housing bubble?  You're advocating the exact same policies that caused this whole fucking mess in the first place.

Keynsian economics only makes sense to those that don't have a functioning understanding of history.

Mon, 02/06/2012 - 13:13 | 2130931 EnglishMajor
EnglishMajor's picture

More credit cards and a cash for old shopping bags program is all we need to keep this party going.

Mon, 02/06/2012 - 13:15 | 2130932 EnglishMajor
EnglishMajor's picture


Mon, 02/06/2012 - 14:42 | 2131228 Antifederalist
Antifederalist's picture

Yeah, and all those savers and people living on fixed incomes deserve to get fucked, right MillionDollarBonus?

We should reward those who rob from the future.  Yeah, that is the ticket.......

Mon, 02/06/2012 - 20:47 | 2131371 cranky-old-geezer
cranky-old-geezer's picture



You know what doomers like you could be doing instead of hiding in your underground bunkers and whining about Armageddon like insane lunatics? Taking out consumer loans and actually HELPING the American economy.

They did during the housing bubble.  Economy looked great.  Everybody making money.  Dow hit 14,000.  Good times all around.

Then what happened?  It all collapsed. 

Why?  Unsustainable debt. 

People started defaulting on mortgages.  Banks foreclosed.  Homes start sitting empty. Home values around them start falling. People realize they're underwater, try to sell, can't sell, so they give keys back to the bank and walk away from it.  More empty homes. Home prices drop further.  MBS market collapses.  Banks go bankrupt. System-wide panic.  '08 financial system collapse.

Nobody saw it coming.  Not you, not Krugman, nobody on Wall Street, nobody at the Fed, nobody in government.  It caught everyone by surprise.

Same thing happened in the stock market crash of '29.   And again in '87.  Nobody saw it coming.

When the sovereign debt (ponzi scheme) bubble pops, nobody will see it coming, not you, not Krugman, nobody on Wall Street, nobody at the Fed, nobody in government.  It'll catch you and everyone else by surprise.

Like others here, I suspect you might be here to entertain us. 

But if you're serious about what you say, you're not just stupid, you're a psychopath.

Anyone with half a brain knows debt-based spending cannot sustain an enconomy.  Eventually debt gets so huge the whole thing collapses, jsut like the debt-fueled housing bubble did.

Growing an economy requires production of sellable goods and services.  Money isn't borrowed, it's earned.

But you and your fellow government morons think production isn't needed.  Jobs can be shipped overseas (or destroyed by oppressive government regulations), and the economy can live on borrowed money from now on.

Of course we know your true motivation.  More debt means more income for banks (and more control over people's lives).

You and your type don't care about the economy. 

All you care about is banks making money.

Mon, 02/06/2012 - 12:23 | 2130789 trilliontroll
trilliontroll's picture

But what is the alternative ? Show me the country that does want to have its currency

to have world reserve status . If there is one country ,where economic conditions seem

to be relative sound. it is Switzerland. What did they do to their currency ? Peg it to the

euro with a lower bound. If they think they cant afford "hard" money , my guess is

that no one can.The same with China (and Japan) . In a world where hard and sound money would me the most important the yuan would already have taken over and

Japan would let the yen go through the roof by being ecnomic paradise on earth.


So what is the outcome of too many debt - what is already needed for a long time in real economic terms - the devaluation of the dollar .



Mon, 02/06/2012 - 14:06 | 2131111 Matt
Matt's picture

I think that ideally, a global reserve currency should not be tied to any country or political organization that has the power to devalue or debase the reserve currency. Perhaps a non-redeemable, gold backed currency could work as a medium of international exchange. Some mechanism would need to be included, to prevent large, ongoing trade imbalances.

Mon, 02/06/2012 - 14:22 | 2131148 SAT 800
SAT 800's picture

You don't understand. A non-redeemable currency is not "backed". Really, it just isn't. A gold re-deemable currency, real world, not hindered by regulations, etc. take it down to the bank and exchange it, currency, is "backed". The US Dollar after WWII was an international standard for international trade because the accounts of the nations were settled, or were known to be, faithfully settled in Gold. So it was independent of any country or political organization as long as this was true. President Nixon severed the link between the international trade dollar and Gold, Unilaterally, to the astonishment of many foreign governments, because he didn't want to pay the US's bills. He simply defaulted. Then, instantly, the dollar became merely an instrument of US policy; whereas before it had been something different. The function of Gold in international trade is as a unit of monetary value and a discipline on the national policy makers; of course, they frequently don't like this discipline; but it is very helpful to the overall funtioning of the world economy. The mechanism for preventing trade imbalances is well understood, and there is an abundant literature available on this subject; remember the world functioned this way for a long time.

Mon, 02/06/2012 - 19:09 | 2132237 Matt
Matt's picture

The problem I see with having the gold be redeemable is that if someone redeems a bunch of it, there is less in circulation. It leaves the currency open to arbitrage opportunities.

The gold reserves would have to be open to regular audit, but I don't see the benefit to having the gold be redeemable?

As long as you know there is X amount of gold in the reserves and Y number of $ for international exchange, it should be possible to reliably price goods and services. Without there being an entity capable of pledging the gold as asset against its debts, I don't see how there would be the same problem as using USD.

Mon, 02/06/2012 - 18:06 | 2132074 Haole
Haole's picture!/JamesGRickards/status/166273273989038081/photo/1



Mon, 02/06/2012 - 16:30 | 2131660 cranky-old-geezer
cranky-old-geezer's picture



So what is the outcome of too many debt - what is already needed for a long time in real economic terms - the devaluation of the dollar .

USD is being devalued already in the marketplace.  It's why prices are rising.

USD has been devalued 1/3 since '08.  40% since '07.

So yes, it's already being devalued.  Just not officially.

Mon, 02/06/2012 - 12:40 | 2130813 RexZeedog
RexZeedog's picture

I know that my $10,000 CD (emergency fund) is making only $2.50 a month in interest.

Hmm... let's see how that stacks up against the former Chancellor of UMass getting over $550,000 a year in government pension income.

At the current rate of interest I get on my CD, to take in $550,000 a year, I would need this amount of capital:

$2.50 x 12 = $30 year. He gets $550,000, I get $30

$550,000 / $30 = 18,333 - He gets over 18,000 times more income per year than me.

So, my $10,000 x 18,333 = $183,333,333

At current interest rates, I would need $183 million dollars to get the same income that this ONE retired government employee gets for government retirement income. And, his numbers are indexed to inflation!

The reason why no one in government understands that low interest rates are killing the economy, not saving it; is that they are all riding the gravy train of nice secure jobs, good salaries and enormous pensions.

The current scheme of public pensions is ruining the economy and economically destroying the working class. Here in Massachusetts, we get taxes, fees, fines, surcharges on everything at all times. All forms of taxes, local, state and federal are far too high.

It's not "let them eat cake" it's "let them eat caviar" - the government people are that out of touch...


Mon, 02/06/2012 - 12:59 | 2130886 RealFinney
RealFinney's picture

The way to work this out is:

$550,000 / 0.0025 = $220,000,000

Bring back the maths captcha, I say.

Mon, 02/06/2012 - 14:28 | 2131170 SAT 800
SAT 800's picture

This is correct; they live in a bubble world. The first article of business is to take care of the Govn. employees; whatever comes after that. Also note, please, that there can be no government employee "Union". A union was invented in the private business sphere as a mechanism for the voice of the worker to be heard, and so he could bargain collectively with the owners of the business. But in the case of the government as an employer, no good faith bargaining is possible; the government negotiator is giving away somebody else's money, (the tax payers), which he doesn not have to struggle to produce; hence the govt. union is a peacock living in a hen house.

Mon, 02/06/2012 - 17:13 | 2131865 Totentänzerlied
Totentänzerlied's picture

Both my mother and stepfather are county civil service. They don't make any more than private sector employees of equal seniority and qualifications. My mother has essentially no pension, benefits are okay; stepfather has a great pension (having 30 years worked) and same benefits. But their jobs are not secure, they have no pay raises for the indefinite future beginning last year, no bonuses ... ever, the county has been laying off and encouraging early retirement, discussing benefit contribution increases.


The people who are infinitely secure and make entirely too much money are the administrators, appointed and elected officials, and cops. Cops can retire after 20 years at full pay, if they take the incentive they get an extra $1000 for every year worked, they get doubletime overtime for the most ridiculous things, they use government cars to commute.


So while I wholeheartedly would agree that the government at every level is economically unsustainable and financially rapacious and ruinous, and that many government jobs at all levels needn't exist, you cannot assume that government employment means the same thing in every case. The spoils of taxation are not evenly divided.

Mon, 02/06/2012 - 12:01 | 2130720 Clayton Bigsby
Clayton Bigsby's picture

PS  It must be incredibly hard to talk will "Dr. Paul Krugman's" cock and balls in your mouth...  Bet they taste better than yo momma's ass, which I ate last night.

Mon, 02/06/2012 - 12:06 | 2130732 Taint Boil
Taint Boil's picture



[I love watching discredited, intellectually inferior libertarians squirm after being totally HUMILATED].....


Dude you’re hilarious. It is well known that you are one of us – your cover is broken. It was a lot funnier before it was known. Damn, another thing ruined…..

Mon, 02/06/2012 - 12:11 | 2130735 Everybodys All ...
Everybodys All American's picture

Might want to look into or determine the impact that interest rate swaps on US Treasuries have on their ultimate price. Just forget that China, Russia, and everyone else has been selling their Treasuries to the Fed. I'll warn you it's not the easiest security to understand.

You'll be much better prepared for the slaughter.

Mon, 02/06/2012 - 12:08 | 2130739 Spastica Rex
Spastica Rex's picture


Mon, 02/06/2012 - 12:10 | 2130741 resurger
resurger's picture

how about a T-Bag Dip? I just came from the GYM

Mon, 02/06/2012 - 12:20 | 2130781 Dr. Engali
Dr. Engali's picture

Some times I wonder if you're Robo in disguise. Curious how you two are never seen at the same time.

Mon, 02/06/2012 - 12:37 | 2130825 10mm
10mm's picture

Never mind perdictions.It's not a question of if,it's when.And when will rear it's ugly head when it's at the end.Fuck perdictions.

Mon, 02/06/2012 - 14:36 | 2131200 moondog
moondog's picture

HAHAHHA.. thanks MDB for bringing me some humor to my day. You are one of the better trolls on ZH ;-)

Mon, 02/06/2012 - 23:27 | 2132823 Newsboy
Newsboy's picture

The end of debt based money, and the bloated bureaucracy which relies upon it, will be very hard on all those at the bottom. who have been made completely dependent upon this arrangement, in order to sustain it for those at the top.

Expect some disruptions in service...

Mon, 02/06/2012 - 11:36 | 2130634 Racer
Racer's picture

Biden: We Have To Spend Money To Keep From Going Bankrupt ....

Mon, 02/06/2012 - 11:36 | 2130635 Frank N. Beans
Frank N. Beans's picture

THAT is a great photo!

Mon, 02/06/2012 - 11:44 | 2130663 BobPaulson
BobPaulson's picture

I was curious if there was some meaning to it that I did not understand.

Mon, 02/06/2012 - 13:47 | 2131061 earleflorida
earleflorida's picture

was he holding onto the umbrella thinking spontaneously [as the markets react?] it was a life-preserver or an inflatable raft; or was that mary poppin's

Mon, 02/06/2012 - 11:39 | 2130645 Clam McCain
Clam McCain's picture

Cause everybodys short...sometimes

Mon, 02/06/2012 - 11:41 | 2130651 somethingelse
somethingelse's picture

Nobody does debt better,

  makes me feel sad for the rest,

      nobody understands it half as well as me,

              baby i'm the best

Mon, 02/06/2012 - 11:43 | 2130658 tarsubil
tarsubil's picture

Yeah, Paul is full of it. He is very successful and honored within our society. That is our society. Lies. When I see Paul mopping floors, I'll know then that this society isn't just a giant turd ball of lies.

Mon, 02/06/2012 - 12:51 | 2130749 WestVillageIdiot
WestVillageIdiot's picture

Anybody that has been inside the system knows that the system does not want independent thinkers.  It does not want men and women of quality.  It wants robots and drones that are willing to regurgitate corporate speak at every turn.  The competent man is often run out of industries that are based upon deception and lies. 

It is no wonder to me how the Krugmans and Bernankes rise to such heights, any more than it is how CNBC stays on the air.  I think it is still on the air.  I never watch it any more.  EVER.  They can have their system.  Just don't expect me to be a part of it. 

Mon, 02/06/2012 - 11:45 | 2130661 Cognitive Dissonance
Cognitive Dissonance's picture

"How can a Nobel-prize carrying economist, who is presumably smart, write such nonsense?"

Because he is a (Nobel-prize carrying) whore. And clearly he enjoys his work.

Mon, 02/06/2012 - 12:00 | 2130714 BandGap
BandGap's picture

Al Gore won a Nobel Prize as did our esteemed Party Leader.  Add Krugman to that growing list of WTF Nobel Prize winners.

Mon, 02/06/2012 - 12:12 | 2130747 Dr. Engali
Dr. Engali's picture

You mean the peace prize isn't supposed to go to liars and war mongering whores?

Mon, 02/06/2012 - 12:13 | 2130755 WestVillageIdiot
WestVillageIdiot's picture

Actually, I believe it is.

Didn't Yasser Arafat win one?  Is any further proof needed?

Mon, 02/06/2012 - 12:40 | 2130833 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture


That one never gets old!

Mon, 02/06/2012 - 14:34 | 2131193 SAT 800
SAT 800's picture

Yes; my all time favorite; the mass murderer of Cambodia. "More high explosives on your villages until "peace" occurs"; the beatings will continue until Morale improves. God, I hate that man; and the frigging idiotic socialist morons on the Nobel peace prize committee.

Mon, 02/06/2012 - 14:37 | 2131208 SAT 800
SAT 800's picture

The truly sicky making part of this is that the masses still give credibility to these "prizes"; As Joseph Goebbels said, the media is an organ on which the State can play many tunes.

Mon, 02/06/2012 - 11:44 | 2130666 Spooky Polish
Spooky Polish's picture


nobody loves meee ! like dept do ...



Mon, 02/06/2012 - 11:45 | 2130668 taniquetil
taniquetil's picture

"For while debt can be a problem..."


Wow, wow, guys, Paul Krugman knows what he's talking about. Lay off of him. He knows that "debt can be a problem"


I'm going to take back everything I ever said about the guy. Paul Krugman, I hereby award you with the "Totally and Completely Understands Economics Forever Award"


You've earned it my friend.

Mon, 02/06/2012 - 11:59 | 2130708 Clueless Economist
Clueless Economist's picture

Thank You very much.

"The only solution to the debt problem, is more debt"

P. Krugman

Nobel winner, author, economist, New York Times writer, Ivy Leaguer, Genius and All-Around Douchebag

Mon, 02/06/2012 - 11:46 | 2130671 Quackking
Quackking's picture

This same genius thinking explains why the provider of his bully pulpit, his employer-of-record (no, not Princeton, I refer to the rapidly plummeting NY Times) will never fail either. "Because we're the New York Times (you fools!)"


Axiom 1: If the pig has no wings, it may be seen to fly, briefly, as in, when dropped from a great height, it temporarily gyrates in air as it falls to earth.

Axiom 2: There is flying, and there is "flying." One ends well.

Mon, 02/06/2012 - 11:57 | 2130704 moroots
moroots's picture

I suppose Krugman would argue that the NYT isn't leveraged enough. 

Or maybe Congress should pass an individual mandate forcing all U.S. citizens to purchase an annual subscription to the NYT.

Mon, 02/06/2012 - 14:39 | 2131214 I am a Man I am...
I am a Man I am Forty's picture

Gretchen Morgenson does great work.

Mon, 02/06/2012 - 14:40 | 2131221 SAT 800
SAT 800's picture

Stop ! Stop right there. That's not funny ! They might do it. God, I hate the New York Fucking Times; fucking propaganda hole spewing dis-information non-stop.

Mon, 02/06/2012 - 11:47 | 2130673 Bunga Bunga
Bunga Bunga's picture

BREAKING: Greece crisis meeting CANCELED.,1518,813638,00.html

Mon, 02/06/2012 - 12:05 | 2130728 BandGap
BandGap's picture

The equivalent of sticking your fingers in your ears and going Lalalalalalalala!

Mon, 02/06/2012 - 14:41 | 2131224 SAT 800
SAT 800's picture

I'm afraid to do this in the present circumstance, I might never stop; and then they'd come and take me away.

Mon, 02/06/2012 - 14:15 | 2131129 Matt
Matt's picture


The crisis is over, so we don't need anymore meeting!


Mon, 02/06/2012 - 14:43 | 2131230 SAT 800
SAT 800's picture

"Ey, Gringo, we doan need no steenkin meetin".

Mon, 02/06/2012 - 11:46 | 2130674 rsnoble
rsnoble's picture

"Markets tank because of Greece" "markets at a top". Those are the headlines so far. Markets down -40 and the SP is still holding a major trendline from fridays gap above it.  We'll see. Looks more like a pause to me. Suspension waiting for good news as usual.  Don't get me wrong I'm in the camp DOW 4k but how long that takes isn't known.

Mon, 02/06/2012 - 12:03 | 2130724 Dapper Dan
Dapper Dan's picture


Obumer is doing what he can to improve the economy , evoking the same plans used by FDR,

Obama signs executive order blocking all assets of Iranian government, including central bank, held in the United States - @Reuters



The Perils of Bankrupting the Enemy

Ever since Japan launched the surprise attack on Pearl Harbor on December 7, 1941, American historians have offered numerous accounts as to what caused Japan to go to war with the United States. Many agree that one of the immediate factors that prompted Japan's war decision was the U.S. oil embargo in the summer of 1941. Some of the leading scholars in the United States have pointed out that this oil embargo was the unintended consequence of president Franklin D. Roosevelt’s executive order on July 25, 1941 to freeze all Japanese assets in the United States.

 At that time, neither the president nor secretary of state Cordell Hull meant to implement a complete oil embargo through the freeze order because they were aware that the oil embargo might provoke Japan into war. Yet, the mid-level hard-line bureaucrats in the State and Treasury departments instituted a virtual oil embargo through manipulating the financial freeze.

 Michael Barnhart's valuable study has already shown that the financial freeze and the unplanned U.S. oil embargo had unfortunate effects on Japanese leaders, who had been pursuing the policy to build an autarkic empire up to that point, for they now felt that Japan must fight for national survival.[1]

The most fascinating and valuable section in Miller's book, in my opinion, is his accounts on how the Roosevelt administration moved toward the financial freeze, and consequently toward the de facto oil embargo, in the midst of a rush of events from May to August 1941. Starting with his "fireside chat" declaring the United States to be in a state of unlimited national emergency on May 27, Roosevelt expanded his executive order to freeze the assets of all of Europe under Axis control, thereby changing the emphasis of freezing control from a "defensive weapon" to an "aggressive weapon.

Edward S. Miller.Bankrupting the Enemy: The U.S. Financial Siege of Japan before Pearl Harbor. Annapolis: Naval Institute Press, 2007. 352 pp. $32.00 (cloth), ISBN 978-1-59114-520-2.

Reviewed by Noriko Kawamura
Published on H-Diplo (October, 2008)
Commissioned by Christopher L. Ball

Mon, 02/06/2012 - 13:19 | 2130960 tired1
tired1's picture

IE: FDR had no idea that lighting the fuse on a stick of dynamite would cause it to explode.

Mon, 02/06/2012 - 12:21 | 2130780 HD
HD's picture

I have little doubt they will hold the market together until the very last second - bullish all the way.

Then something formerly dismissed as "priced in" will be all of a sudden actually matter.

At the very least I'm betting we revisit S&P 1100.

Mon, 02/06/2012 - 14:59 | 2131290 therearetoomany...
therearetoomanyidiots's picture

"I have little doubt they will hold the market together until the very last second" - that last second occurs November 7, 2012 when Obama officially re-elected....they can't rid of 'their guy in the police department".

Mon, 02/06/2012 - 11:49 | 2130678 HyperLazy
HyperLazy's picture

Poor Doc Kruggles, so miss understood. Isolated and forever alone in his self exiled Ivory Tower...

"Paulpunzel! Paulpunzel! Let down Your Hair!!!!111"

Oh wait this is the same self indulgent quack who proclaims the potential economic virtue of ALIEN INVASION?! Really?

Mon, 02/06/2012 - 11:56 | 2130702 onebir
onebir's picture

Calling WilliamBanzai7!

Mon, 02/06/2012 - 12:08 | 2130736 Libertarian777
Libertarian777's picture

according to Krugman's logic, the Iranians are wanting to go to war, to get out of their economic mess caused by sanctions.... cos war creates jobs and stuff and reduces the unemployment rate (especially if you send the unemployed in mass waves to attack heavily fortified positions)...WINNING!!

Mon, 02/06/2012 - 11:48 | 2130679 Misean
Misean's picture

Eating your seed corn gives you more energy to plant...DUH!

Mon, 02/06/2012 - 11:49 | 2130680 HungrySeagull
HungrySeagull's picture

0 Percent Interest IS the debt relief.

Now if it becomes something like 20% Fed overnight with banks and C/C charging 35-50 APR then we will feel the full crushing weight of the debt that must be either dropped off or we are lost.

If Gold 10K and silver 300+ a few peices of metal from the earth will abolish all debt.


Mon, 02/06/2012 - 11:52 | 2130686 Mercury
Mercury's picture

Funny how the same people who say debt doesn't matter also insist that we need to raise taxes.

Mon, 02/06/2012 - 14:48 | 2131247 SAT 800
SAT 800's picture

"Governments don't need to pay back their debts, they just need to insure that rise slower than their tax base". Oh, okay, then. No, Wait a minute. Who is this tax base? Me? Me, I'm the tax base? Hey, fuck this, buddy; get yourself another stooge.

Mon, 02/06/2012 - 11:56 | 2130699 Payne
Payne's picture

zero corp taxes for the next few years and no additional government spending.

Mon, 02/06/2012 - 12:01 | 2130718 LowProfile
LowProfile's picture

Ah, Krugman...  You never let us down!

Argument from authority (also known as appeal to authority or argumentum ad verecundiam) is a special type of inductive argument which often takes the form of a statistical syllogism.[1]

Although certain classes of argument from authority do on occasion constitute strong inductive arguments, arguments from authority are commonly used in a fallacious manner.[1][2][3]



Mon, 02/06/2012 - 12:01 | 2130719 Benjamin Simon
Benjamin Simon's picture

Is MDB in fact Paul Krugman?  It's just like when I told you all that Chris Hays and Rachel Madcow are in fact the same guy girl or whatever.

Mon, 02/06/2012 - 12:05 | 2130729 slewie the pi-rat
slewie the pi-rat's picture

maybe he's got the 3-year rolling average and he doesn't have it properly labelled, but i was under the impression that marginal debt utility was a negative number at this point

i'm probably just mistaken...

Mon, 02/06/2012 - 12:05 | 2130730 resurger
resurger's picture

-1 if you hate Paul Krugman!


Mon, 02/06/2012 - 12:09 | 2130740 --- - .. ... .....
--- - .. ... .... . .-. - --..'s picture

Ahh Kruggles,


I want to pet him and give him taffy.



Mon, 02/06/2012 - 14:54 | 2131269 SAT 800
SAT 800's picture

.._.  .._  _._.  _._  _._  ._.  .._  __.  __ ._  _.    _._

Mon, 02/06/2012 - 12:11 | 2130743 jmcadg
jmcadg's picture

MBS, You're officially more of an embarrestment that RobotTrader.

That's some accomplishment.

Mon, 02/06/2012 - 12:12 | 2130748 Eric L. Prentis
Eric L. Prentis's picture

Professor Paul Krugman of Princeton, seems to be a stealth neocon, trying to get more government money for his financial elites, so they and he can remain in power, just a little longer.


Paul, love your cushy job a the NYT.

Mon, 02/06/2012 - 12:12 | 2130750 HD
HD's picture

We have to reduce debt. The question is how.  Given the opportunity - TPTB will cut services and funding to those who can not fight back - the poor, the sick or not politically connected.  Anyone with a lobbyist or who donates money to election campaigns will likely be spared until no options remain. Why do millionaires get social security? Why don't health care providers have to disclose costs upfront BEFORE care is given? How is it that property values have fallen 30, 40% or more - but property taxes remain the same?

For those that think the OWS have disappeared are kidding themselves. Wait for spring...


Mon, 02/06/2012 - 12:16 | 2130766 blunderdog
blunderdog's picture

One additional dollar of debt has led only to 25 cents additional GDP. This is the “marginal utility of debt” (how much you get out of an additional dollar of government spending).

While I agree completely with the intent of the article, this isn't a supported conclusion.  The $4 trillion spent may have been "replacing" loss in previous velocity.  Point being--there's no contrafactual to weigh the current GDP numbers against.  It's certainly *possible* that if you cut Medicare/SS spending by, say, $1T/year, the GDP number comes out $1T lower, meaning the marginal utility of government debt is still near 1.

The thing is that doesn't matter.  "GDP" is a stupid statistic, and spending as a percentage of GDP is even more stupid.  The most stupid thing in the world is the comparison of "debt to GDP" as if this represents some kind of mathematical or physical reality.  It doesn't--it's a statistic which appears to be designed to encourage central banks' intervention, when we have a pretty good historical record demonstrating that increased intervention results in increased instability.

A year ago or thereabouts I heard Rickards say he thought Americans could take a lot of short-term pain if we could resume normal growth.  I think he was right about that, but everything that's been done since has been an effort to prevent *any* pain to the great wealth-holders.  The priorities are backwards.  I expect we're going to have to deal with long slow torture for 95% of the population for quite awhile before strategy is reassessed.

Mon, 02/06/2012 - 12:16 | 2130767 Eric L. Prentis
Eric L. Prentis's picture

Since 2000, the national debt has increased from about $5.6 trillion dollars to $15.3 trillion dollars, or 273%, in twelve years. Adding in the increased debt at the Fed for QE 1&2, +$2.1 trillion dollars, and Fannie Mae and Freddie Mac debt, +$5.3 trillion dollars, brings the US national debt to $22.7 trillion dollars, or 149% of GDP. Fiscal policy is under severe strain, and politically, expanding it is unworkable.


Public and private debt is about 370% of GDP. As the public deleverages, mainly through bankruptcy and defaulting on their underwater mortgages, government has attempted to spend more to maintain demand. The problem is we have hit a debt wall, it is impossible to service debt when it is 370% of GDP.


All the stupid decisions by the financial elite have already been made (Mortgage fraud, securitization, MERS, robo-signing). The American people no longer want to use taxpayer money to support the status quo.


The only solution is debt forgiveness. Let the zombie banks die. Raise interest rates to increase demand. Let’s transition out of this casino financial system and start growing the real economy again.


Mon, 02/06/2012 - 14:54 | 2131265 therearetoomany...
therearetoomanyidiots's picture

Clearly life in the US was much better in 2000 than it is now.   What has changed....might be that 273% increase.

Mon, 02/06/2012 - 12:22 | 2130786 Seasmoke
Seasmoke's picture

Krugman and Obama.......just 2 of many stains on the Nobel reputation

Mon, 02/06/2012 - 12:28 | 2130796 Happy Swede
Happy Swede's picture

Totally wrong, Krugman is right, though for the wrong reasons. The only thing that really matters when it comes to debt sustainability for a sovereign currency issuer like the US is the debt interest effect on inflation. T-bonds are essentially money, just with a higher interest. I.e. money is a checking account whereas bond or "debt" is a savings account. 

Just think for a while, who do you think is the reciever of the interest from the "debt". Savers of course (approx. 70% of which are americans), mostly pension funds etc. My god we need to pay down those terrible T-bonds so that grandma can get rid of her savings. 

And btw taxes are not funding anything. They just serve to control demand and to force us all to use the state money, i.e. USDs. So the idea that interest payments are "eating up" the money for investments etc. is just stupid, the gov is not revenue constrained (only inflation constrained). 

Mon, 02/06/2012 - 14:52 | 2131261 therearetoomany...
therearetoomanyidiots's picture



Is that why grandma's and everyone else's savings are rapidly dwindling?



Mon, 02/06/2012 - 15:06 | 2131318 SAT 800
SAT 800's picture

Okay, Granma is collecting the interest on the T-Bonds; who is paying the interest on the T-Bonds? Taxes are not funding anythng? Hmm. Well, what happens to them, then? do they vaporize? More detail, please.

Mon, 02/06/2012 - 12:32 | 2130806 AnAnonymous
AnAnonymous's picture

Paying back debt doesn’t impoverish; spending money you don’t have does.


Made me laugh.

The opening gambit of the article is to claim outing propagandists.

If it is Krugmann's line then he is right.

Paying back debt empoverishes. Not paying back a debt leaves the debtor richer and the creditor poorer. Hence the attraction of non sustainable debt, which is by construction non repayable.

Paying with money you dont have makes you richer as you acquire in exchange wealth and makes anyone who accepts that money you do not have poorer.

So yes, if indeed this is the line followed by US citizen Krugmann, he is right and quite direct actually.

Unsustainable debt has made the US much richer than it was.

The US of A is definitively on the right side of the fence when it comes to the debt. Exterior people who are holding US debt and/or who accepted USD, on the wrong side.

Mon, 02/06/2012 - 12:32 | 2130809 jmcadg
jmcadg's picture

'Er ... did you not hear what I said?'

We heard you, we just weren't listening.

So we should all be taking out loans to help the economy.

I know it's stating the obvious, but, YOU'RE A MORON.

Mon, 02/06/2012 - 12:35 | 2130818 chunkylover42
chunkylover42's picture

Go back to the Bush years and you'll see the very same Mr. Krugman hyperventilating about excessive debt levels.  He even goes so far as to tell readers that he locked in his mortgage rate because interest rates were sure to skyrocket due to all the debt.

The man is a menace who analyzes everything through a political lens - one that makes Democrats look good and Republicans look bad.  It doesn't mean he's wrong all the time, but when he consistently leaves out certain data, uses misleading charts, or flips his entire premise based on who is in office, he loses credibility.

Mon, 02/06/2012 - 12:37 | 2130824 Vince Clortho
Vince Clortho's picture

I am humbled by the towering IQ of Krugman and his legion of savant followers.

Solve debt with more debt.  Keep repeating that ...

Screw the numbers. Economics is really nothing more than marketing.

Perhaps one day Krugman will explain the true significance of a parabolic curve to the unwashed masses.

Mon, 02/06/2012 - 12:48 | 2130853 AnAnonymous
AnAnonymous's picture

Solve debt with more debt.


That is the classical duo played by US citizens.

Wont follow much but apparently, US citizen Krugmann has a fit of honesty, telling outright that going deeper into debt was not meant to solve the debt issue but to acquire something else.

Maybe, it is why he is getting so much flak. He might be way too direct in his views, speaking of what US citizens actually do instead of speaking of things US citizens dont do.

Mon, 02/06/2012 - 15:44 | 2131169 moondog
moondog's picture

OK, here we go again with the anti-US citizen propaganda.

I'm no big fan of the crony capitalism in the US, nor the completely captured government.

That being said, your incessant hammering makes me think you are part of the Chinese government propaganda machine. You sir, are a one trick pony.

Let's see if I can replicate your ridiculous chatter. This is my first try at this silliness, so excuse me if I am not as seasoned in the propaganda department. I have a fondness for the Chinese people (I have relatives in China) and I understand that the true culprits are the giant international corporations and banks. Let's set that aside for my attempt at your line of thinking...

Whenever you see debt, it is because of Chinese theft due to Chinese citizenism.
Chinese citizenry have been stealing intellectual property from non-Chinese entities for years.

Whenever you see debt, it is because of industrial base erosion of developed countries caused by Chinese citizenism.
Chinese citizens have been placing hugely restrictive barriers to Chinese markets, while decrying barriers to foreign ones.

Do you understand the silliness of my statements? Or yours?

Do you think it is the International Corporations and Banks that have incredible influence on ALL governments that lead to many of the poor outcomes throughout the world?

Do you honestly think that the poor citizens of China or the US have a great deal of influence on these outcomes?

Think man!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Mon, 02/06/2012 - 12:52 | 2130859 Downtoolong
Downtoolong's picture

I have no doubt that the future management of all the government debt, in addition to the Fed’s ballooning balance sheet, GSE’s, etc., etc., is going to work out splendidly for a select chosen few.

Mon, 02/06/2012 - 15:09 | 2131326 SAT 800
SAT 800's picture

Yeah, the select chosen few who have silver or gold in a vault for their savings account.

Mon, 02/06/2012 - 13:03 | 2130894 Dorky
Dorky's picture

Krugman was right. Spending is the only solution to maintain the recovery. The right question is what spending needed to be done. The answer is to spend on the productive sector of the economy. Read more about Richard Koo's "balance sheet recession". Cutting spending in the middle of a recession will only make things worse. But that doesn't mean we should just blindly spend away. The idea is to spend right.

Mon, 02/06/2012 - 13:29 | 2130997 Clowns on Acid
Clowns on Acid's picture

Yo Dorky....when did the Fed Gov't ever "spend right"?

The Fed Gov't has to cut spending period. They then have to encourage private investment so that tax revenues rise. They have to simplify the tax code so that corp.'s actually pay taxes.

This means Gov't get out of economy. But that cannot happen with a community organizer (read left wing facsist) as Pres.

It is the only way forward....or into the abyss. Got it?


Mon, 02/06/2012 - 14:47 | 2131242 therearetoomany...
therearetoomanyidiots's picture

Even Keynes didn't believe in spending in high debt situations...

Mon, 02/06/2012 - 13:05 | 2130896 loveyajimbo
loveyajimbo's picture

Krugman has always been an asshole, as is anyone foolish enough to listen to him.  When the entire GDP is used up in paying the interest on the (meaningless) debt, then perhaps they will learn why the PIIGS had such a hard time...


Of course, we could just default and screw the Chinese, they have been screwing us for years...

Mon, 02/06/2012 - 14:46 | 2131238 therearetoomany...
therearetoomanyidiots's picture

Do you think that is the brilliance of this adminstration, that might be what they are actually doing?   Killing their prometheus (china)? 


I threw up a little in my mouth when I wrote that...sorry if the same happened to you.

Mon, 02/06/2012 - 13:14 | 2130936 Don Levit
Don Levit's picture

A few posts back, a commenter talked about GDP and the money velocity.

In an article entitled the GDP Deception, the author states it very simply:  GDP is the supply of money times the money velocity.

The money velocity was 2.0  10 years ago.  Today, it is 1.6.

With the same money supply, GDP would have decreased!


If debt adds to the GDP, then it is considered an asset, right?

Where does the liability part show up?

Don Levit

Mon, 02/06/2012 - 13:18 | 2130953 Don Levit
Don Levit's picture

A few posts back, a commenter talked about GDP and the money velocity.

In an article entitled the GDP Deception, the author states it very simply:  GDP is the supply of money times the money velocity.

The money velocity was 2.0  10 years ago.  Today, it is 1.6.

With the same money supply, GDP would have decreased!


If debt adds to the GDP, then it is considered an asset, right?

Where does the liability part show up?

Don Levit

Mon, 02/06/2012 - 14:03 | 2131105 blunderdog
blunderdog's picture

Where does the liability part show up?

In the honest description of our country's fiscal policies from our elected officials.  You know, when the President stands up and says we've got $50,000 per citizen we've got to pay off.

(Well, at least, that's where it *would* show up if we ever elected an honest President.)

Mon, 02/06/2012 - 13:45 | 2131057 Grey-Ghost
Grey-Ghost's picture

Krugman, Obama, Bernake, fill in the blank - all those midgets do not matter at all.

The real issue I have is with all the countries all over the world, gobbling up the US dollar (or T-bonds, or whatever...) like there's no tomorrow. 70% of the world's money supply is still in American dollars, some 50% of it abroad. And the game is clear - once all this Ponzi starts collapsing, the US military will step in and force the world to start liking the dollar all over again.

As long as American mercenary in Iraq can buy whatever American mercenaries in Iraq purchase or any other American parasite in Japan or in any of the countries occupied by the US can use their dollars to pay for the rent, gasoline, hookers or coke, they, the rulers' serfs would have enough purchasing power to keep serving The Sheeplords.

The sheep at home does not matter anymore. America is not a country or a state - it is a concept, a fascist concept at that.

Mon, 02/06/2012 - 14:12 | 2131124 docj
docj's picture

Every drunk thinks they can drink themselves sober, and every junkie thinks the next fix will be "the one they've been waiting for".

It will end about as well for our debt-adicted society. I can only hope that Paulie Krugnuts will get the special "1797" treatment once it all starts to come unraveled. It will be a small consolation for the utter terror we'll all have to endure at the hands of he and his ilk. 

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