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Ah the French

France is traveling the same road that Greece, Spain, and some other European countries followed years before. When the French economy begins to collapse I doubt very much that the German government will bail them out. Continue Reading →

The Current State of the Government Debt

The debt-to-GDP ratio is too high. The U.S. is not Greece or Italy — yet. But if we stay on the current path, at some point an auction of Treasury securities will fail in the sense that there will be no bidders from the private sector. The Fed could bail out Treasury by purchasing the entire new issue. But that is a policy choice that the Fed must make. The really scary part of all this is that nobody knows the debt-to-GDP ratio at which an auction will fail. There will be warnings, however. Watch for rising interest rates on TIPS (Treasury Inflation Protected Securities).
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National Income Accounting and the Most Recent NPR Fail

The more subtle issue is a complete misunderstanding of what GDP measures. Most principles of economics texts get this pretty much: gross domestic product is the market value of all goods and services produced in a country during a calendar year. Read that again and see if you can find the words “spending” or “transactions.” You can’t because GDP measures neither of those. GDP measures production, not spending. Continue Reading →

U.S. Government Debt

In the not-too-distant past you could find this information pretty easily on the U.S. Treasury Department website. … It took me the better part of two hours to find and assemble the data … And the editing basically involved converting a text table (which was not formatted as a table …) into an Excel workbook. Tedious, boring, and requires a pretty good attention to detail. You think maybe Treasury has something to hide? Continue Reading →