Paul Krugman, "Fiscal Fever Breaks": Four Legs Good, Two Legs Better!

Remember how Paul Krugman once wrote concerning Occupy Wall Street (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html):

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."

And then there was Krugman's trillion dollar coin proposal, which even Jon Stewart labeled a "stupid f#cking idea" (see: http://www.salon.com/2013/01/15/jon_stewart_responds_to_krugman_platinum_coin_is_still_a_stupid_fcking_idea/).

Well today, in his latest New York Times op-ed entitled "Fiscal Fever Breaks" (http://www.nytimes.com/2013/12/30/opinion/krugman-fiscal-fever-breaks.html?ref=opinion&_r=0), Krugman would have us know that the US has been "suffering from fiscal fever: the insistence by virtually the entire political and media establishment that budget deficits were our most important and urgent economic problem, even though the federal government could borrow at incredibly low interest rates." Krugman concludes by informing us:

"But while policy remains terrible, we’re finally starting to talk about real issues like inequality, not a fake fiscal crisis. And that has to be a move in the right direction."

Got it: The $17.3 trillion of debt owed by the US federal government can now be ignored, because the US can borrow at low interest rates. Who cares if this debt will never be paid back?

And who cares that the US owes much of this money to China, which just happens to lead the world in capital punishment. Capital punishment? Oh yes, that's the thing the New York Times editorial board just by chance is also denouncing today (http://www.nytimes.com/2013/12/30/opinion/the-slow-demise-of-capital-punishment.html?ref=opinion). Who cares if the US is in hock to a nation where anything remotely approaching "equality" does not exist.

Fiscal fever has broken? Yeah, right. Let's see what happens when the true cost of Obamacare becomes known. Ultimately, in the name of equality, someone is going to have to pay for this fiasco.

We're finally talking again about "inequality"? Does this mean that Krugman is again ready to endorse the tenets, including anti-Semitism, of Occupy Wall Street?

Which brings to mind George Orwell's "Animal Farm," where we learned that even in would-be utopian societies, "All animals are equal, but some animals are more equal than others."

Gail Collins, "Let’s Make a Deal": The "Game of Chicken" Is Over

Okay, the Republicans' "game of chicken" is over, and the debt ceiling has been raised. With US national debt just a tad under $17 trillion, or some $148,000 per taxpayer, the federal government can continue with its profligate spending, "shifting the burden of bad choices today onto the backs of our children and grandchildren" and ignoring an insuperable "debt problem and a failure of leadership" (Senator Obama, opposing an increase in the debt ceiling, March, 2006). Of course, I steadfastly favored a compromise solution to be reached via round-the-clock negotiations, but instead, the can has merely been kicked down the road by another few months.

In a New York Times op-ed entitled "Let’s Make a Deal" (http://www.nytimes.com/2013/10/17/opinion/collins-lets-make-a-deal.html?_r=0&adxnnl=1&ref=opinion&adxnnlx=1381984460-bJo719m+VE3dbLc8CrQyhg), celebrating the Republicans' retreat from the brink of a world economic catastrophe, even Gail Collins acknowledges that the problem remains. Collins writes (my emphasis in red):

"Let’s think positive. Americans want to get back to normal. We want to admire the fall foliage and plan for Thanksgiving and complain about Congress’s failure to pass a farm bill. There is nothing we find more attractive than the sight of a bipartisan majority, holding hands to kick the budgetary can down the road.

. . . .

The House whipped through its approval with virtually no comment. There is nothing more efficient than a sullen majority. Democrats said a few lukewarm words about the agreement. 'It does have my support as a means to an end,' said Minority Leader Nancy Pelosi. Good work in repressing the temptation to gloat, House Democrats!"

In fact, there is no reason to celebrate. America's unsustainable debt has gone untreated, and like a cancer, it continues to grow.

A villain in Collins's opinion piece? Ted Cruz, of course:

"Would you say that Congress is more like the movie 'Gravity' (government employees helplessly adrift in space) or the movie 'Captain Phillips' (hero trapped in small, sweaty place with unstable people waving guns)?

I am going for 'Captain Phillips,' which has Tom Hanks stuck in the end in a lifeboat-capsule with three Somali pirates: the navigator who does not know how to steer, the strongman who keeps shrieking and threatening everybody, and a nice kid who is in way over his head.

Obviously, we the people get the Tom Hanks role. Everybody likes Tom Hanks. I will allow you to attach Congressional identities to each pirate. Feel free to bring up Ted Cruz."

But whose name is not even mentioned once in this op-ed, bursting with chuckles? Oh, that's right - no mention of President Obama.

Regarding Obama's failure to engage, Leon Panetta very recently stated (see: http://jgcaesarea.blogspot.co.il/2013/10/maureen-dowd-pope-trumps-president.html):

"This is a town where it’s not enough to feel you have the right answers. You’ve got to roll up your sleeves and you’ve got to really engage in the process . . . that’s what governing is all about.'"

Well, while campaigning, Obama liked to roll up his sleeves for the cameras. But get his hands dirty while Congress hammered out a debt ceiling deal? No way. Like Chance the Gardener in Jerzy Kosinski's "Being There," made into a magnificent movie in 1979 starring Peter Sellers, Shirley MacLaine, Melvyn Douglas and Jack Warden, Obama likes to watch.

Maureen Dowd, "Pope Trumps President": Obama Should Learn From a Soap Opera?

In her latest New York Times op-ed entitled "Pope Trumps President" (http://www.nytimes.com/2013/10/16/opinion/dowd-pope-trumps-president.html), Maureen Dowd describes an ABC television soap opera named "Scandal" (I am not familiar with it) and then asks, regarding America's real-world crisis:

"Why hadn’t President Obama used a pretext to lure John Boehner, Ted Cruz and Harry Reid to the White House, locked them in a bunker and kept them there until they hammered out a deal to save America’s reputation?"

Well, if you are a regular reader of this blog, you know that I have been calling for round-the-clock negotiations to end the shutdown crisis for some time (see: http://jgcaesarea.blogspot.co.il/2013/10/paul-krugman-dixiecrat-solution.html). But this is not a real-world presidential administration, owing to the fact that President Obama does not know how to govern. He is expert at campaigning and reading from a teleprompter; however, he still hasn't learned to govern.

As observed in Dowd's conclusion, even David Axelrod acknowledges this shortcoming:

"David Axelrod admitted to The Boston Globe’s Matt Viser that the Obama team should have involved Obama more in interacting with Capitol Hill from the beginning, so the aloof president who breezed through the Senate could learn how the velvet-and-vise game is played. Instead, negotiating with the Hill was outsourced to Rahm Emanuel, who makes Pope seem like a defeatist.

'If I rethink it,' Axelrod said, 'maybe we were too reliant on Rahm and should have engaged the president more in those early months and years.'

When the ship of state turns into the ship of fools, we all sink."

Maybe they "should have engaged the president more in those early months and years"? But why would they possibly want to do such a thing, thereby depriving the president of his alibi that he learned about something only "when it came out in the news" (see: http://www.huffingtonpost.com/2013/05/19/obama-irs-targeting_n_3302449.html)?

In a recent Washington Post opinion piece entitled "Panetta rebukes Obama’s handling of shutdown" (http://www.washingtonpost.com/opinions/ruth-marcus-leon-panetta-rebukes-obamas-handling-of-shutdown/2013/10/14/d5252dc4-34f9-11e3-be86-6aeaa439845b_story.html?tid=pm_pop), Ruth Marcus also noted that Leon Panetta has become cognizant of Obama's failings, although Panetta is a bit more candid than Axelrod:

"Leon Panetta served in Washington with nine presidents, starting with Lyndon Johnson. He has been a member of Congress, Office of Management and Budget director, White House chief of staff, director of the Central Intelligence Agency and secretary of defense — the last two under President Obama. He is a man who knows Washington and knows how to choose his words. So Panetta’s implicit rebuke of the president’s hands-off approach to the budget crisis at a breakfast Monday was striking.

. . . .

'We govern either by leadership or crisis. . . . If leadership is not there, then we govern by crisis,' Panetta said at the start of the session, sponsored by The Wall Street Journal. 'Clearly, this town has been governing by crisis after crisis after crisis.'

. . . .

Then, to Obama. 'This president — he’s extremely bright, he’s extremely able, he’s somebody who I think certainly understands the issues, asks the right questions, and I think has the right instincts about what needs to be done for the country.'

Next came the 'but' — without a name but with a clear message. 'You have to engage in the process. This is a town where it’s not enough to feel you have the right answers. You’ve got to roll up your sleeves and you’ve got to really engage in the process . . . that’s what governing is all about.'"

"You’ve got to roll up your sleeves"? That's odd. When Obama was campaigning in 2012, his sleeves were always rolled up (so were Romney's). But I suppose that in today's Brave New World, it's all about imagery, having little or nothing to do with substance or reality.

Thomas Friedman, "Sorry, Kids. We Ate It All.": Obama and Friedman, Card Carrying Tea Party Members?

In March 2006, opposing an increase in America's debt ceiling to a "mere" $9 trillion, Senator Obama declared:

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. . . . Increasing America’s debt weakens us domestically and internationally. Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

Today, under the stewardship of President Obama, the US is facing default unless Congress raises the current $16.7 trillion debt ceiling.

In his latest New York Times op-ed entitled "Sorry, Kids. We Ate It All." (http://www.nytimes.com/2013/10/16/opinion/friedman-sorry-kids-we-ate-it-all.html?_r=0&adxnnl=1&adxnnlx=1381886081-6IgZZNIjNavDTwi5fR242A), Thomas Friedman similarly acknowledges that the future of America's "children and grandchildren" is bleak. Friedman writes (my emphasis in red):

"Eventually this shutdown crisis will end. And eventually the two parties will make another stab at a deal on taxes, investments and entitlements. But there’s one outcome from such negotiations that I can absolutely guarantee: Seniors, Wall Street and unions will all have their say and their interests protected. So the most likely result will be more tinkering around the edges, as our politicians run for the hills the minute someone accuses them of “fixing the deficit on the backs of the elderly” or creating “death panels” to sensibly allocate end-of-life health care. Could this time be different? Short of an economic meltdown, there is only one thing that might produce meaningful change: a mass movement for tax, spending and entitlement reform led by the cohort that is the least organized but will be the most affected if we don’t think long term — today’s young people."

Friedman goes on to say that "if current taxes and entitlement promises are not reformed, the cupboard will be largely bare for today’s Facebook generation."

And indeed, this is what we are also being told by Douglas Elmendorf, head of the Congressional Budget Office, who recently declared, "The federal budget is on a course that cannot be sustained indefinitely" (http://www.cnbc.com/id/101065200).

And as much as I believe in universal health care, the disastrous rollout of Obamacare demonstrated that government is incapable of efficacious policy implementation. If a public corporation were to introduce a product in this same manner, top management would be fired, unless of course, the debacle didn't first result in bankruptcy.

But the federal government need not file for bankruptcy, inasmuch as more money can always be printed until it is finally understood that US government credit ratings need to be significantly downgraded, prompting a cataclysmic world economic disaster.

Indeed, our children and grandchildren are being sold into servitude . . . or even worse.

New York Times Editorial, "The Senate Tries to End the Crisis": Leon Panetta for President?

In an editorial entitled "The Senate Tries to End the Crisis" (http://www.nytimes.com/2013/10/15/opinion/the-senate-tries-to-end-the-crisis.html?_r=0), The New York Times tells us:

"The Senate, forced to extinguish the wildfire set by the House, is nearing a deal to reopen the government and end the imminent threat of default by the United States government. Some of the provisions in the deal are troubling, and senators need to ensure that it doesn’t in any way give in to Republican blackmail.

. . . .

But the tentative agreement includes two problematic provisions related to health care reform. One would require the Department of Health and Human Services to verify that people receiving subsidies for insurance have incomes low enough to qualify."

Of course, we wouldn't want to ensure that people receiving subsidies for insurance have incomes low enough to qualify. After all, we want to make certain that Obamacare is just as prone to fraud as Medicare.

Meanwhile, over at The Washington Post (http://www.washingtonpost.com/opinions/ruth-marcus-leon-panetta-rebukes-obamas-handling-of-shutdown/2013/10/14/d5252dc4-34f9-11e3-be86-6aeaa439845b_story.html?tid=pm_pop), uber-liberal Ruth Marcus notes Leon Panetta's criticism of Obama's handling of the shutdown crisis. Marcus writes:

"Leon Panetta served in Washington with nine presidents, starting with Lyndon Johnson. He has been a member of Congress, Office of Management and Budget director, White House chief of staff, director of the Central Intelligence Agency and secretary of defense — the last two under President Obama. He is a man who knows Washington and knows how to choose his words. So Panetta’s implicit rebuke of the president’s hands-off approach to the budget crisis at a breakfast Monday was striking.

. . . .

'We govern either by leadership or crisis. . . . If leadership is not there, then we govern by crisis,' Panetta said at the start of the session, sponsored by The Wall Street Journal. 'Clearly, this town has been governing by crisis after crisis after crisis.'

. . . .

Then, to Obama. 'This president — he’s extremely bright, he’s extremely able, he’s somebody who I think certainly understands the issues, asks the right questions, and I think has the right instincts about what needs to be done for the country.'

Next came the 'but' — without a name but with a clear message. 'You have to engage in the process. This is a town where it’s not enough to feel you have the right answers. You’ve got to roll up your sleeves and you’ve got to really engage in the process . . . that’s what governing is all about.'"

And so, even Ruth Marcus has come to realize that Obama lacks leadership capabilities.

Marcus's conclusion:

"As to the notion that any proposal associated with Obama was inherently toxic to Republicans, Panetta said, 'If the president, for whatever reason, feels he can’t do it because the Republicans don’t want to confront him, then he ought to be willing to delegate that responsibility to someone who can do it.'

I’ve got a stellar candidate in mind. His name is Leon Panetta. He seems awfully happy back home in Monterey, Calif. But he also remembers the way to Andrews — and what it takes to get things done once you arrive."

If you are a regular reader of this blog, you know that I have been calling for round-the-clock negotiations to end the shutdown crisis (see: http://jgcaesarea.blogspot.co.il/2013/10/paul-krugman-dixiecrat-solution.html).

A "stellar candidate" to manage the shutdown negotiations? Heck, how about a stellar candidate to be the next president of the United States?

Paul Krugman, "The Dixiecrat Solution": American Roulette

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. . . . Increasing America’s debt weakens us domestically and internationally. Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

- Senator Barack Obama, March 20, 2006

In 2006, Senator Obama was opposing an increase in America's debt ceiling to $9 trillion. Today, the US, under the stewardship of President Obama, is facing default unless Congress raises the current $16.7 trillion debt ceiling.

In his latest New York Times op-ed entitled "The Dixiecrat Solution" (http://www.nytimes.com/2013/10/14/opinion/krugman-the-dixiecrat-solution.html?_r=0), Paul Krugman compares Republican opposition to raising the debt ceiling to the antics of a neighbor from hell. Krugman writes:

"So you have this neighbor who has been making your life hell. First he tied you up with a spurious lawsuit; you’re both suffering from huge legal bills. Then he threatened bodily harm to your family. Now, however, he says he’s willing to compromise: He’ll call off the lawsuit, which is to his advantage as well as yours. But in return you must give him your car. Oh, and he’ll stop threatening your family — but only for a week, after which the threats will resume."

Krugman's solution:

"Despite denials from Republican leaders, everyone I talk to believes that it would be easy to pass both a continuing resolution, reopening the government, and an increase in the debt ceiling, averting default, if only such measures were brought to the House floor. How? The answer is, they would get support from just about all Democrats plus some Republicans, mainly relatively moderate non-Southerners. As I said, Dixiecrats in reverse."

Query: Is Krugman's comparison between Republican objections to raising the debt ceiling and an obnoxious neighbor making your life hell a correct analogy? Or is it more apt to compare such objections to a wife threatening her husband with divorce if he doesn't stop his drunken spending spree, which is threatening their household with bankruptcy?

Don't get me wrong: A compromise needs to be reached. Quickly. A default by the US government would decimate the world economic order.

On the other hand, as Douglas Elmendorf, head of the Congressional Budget Office, recently declared, "The federal budget is on a course that cannot be sustained indefinitely" (http://www.cnbc.com/id/101065200).

Peculiar how President Obama is capable of bending over backwards to avoid conflict with overseas bullies, but is willing to play "tough guy" at home and jeopardize what's left of the economy. I suppose the way he sees it, voters would place most of the blame on Republicans. However, this is not a time for politics.

Krugman's conclusion:

"The question for the next few days is whether plunging markets and urgent appeals from big business will stiffen the nonextremists’ spines. For as far as I can tell, the reverse-Dixiecrat solution is the only way out of this mess."

A "reverse-Dixiecrat solution is the only way out of this mess"? I don't think so. The damage in the interim would be immense.

Instead, how about both sides attempting to control their inflated egos and engaging in round-the-clock talks until a settlement is reached. The alternative is disaster.

Who blinks first? Who is to blame? Who cares.

Settle it.

Paul Krugman, "Dealing With Default": Defy Congress and Ignore the Debt Ceiling?

Paul Krugman is just chock full of good ideas. Remember how he once wrote concerning Occupy Wall Street (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html):

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."

And then there was Krugman's trillion dollar coin proposal, which even Jon Stewart labeled a "stupid f#cking idea" (see: http://www.salon.com/2013/01/15/jon_stewart_responds_to_krugman_platinum_coin_is_still_a_stupid_fcking_idea/).

Today, in his latest New York Times op-ed entitled "Dealing With Default" (http://www.nytimes.com/2013/10/11/opinion/krugman-dealing-with-default.html?_r=0), Krugman has another stroke of genius concerning what Obama could do if the US were to indeed hit the debt ceiling. After observing the disastrous potential consequences of the US government delaying or "prioritizing" repayment of its debt, Krugman notes that the president has another option: He could simply ignore Congress and the debt ceiling. Krugman writes:

"Many legal experts think there is another option: One way or another, the president could simply choose to defy Congress and ignore the debt ceiling.

Wouldn’t this be breaking the law? Maybe, maybe not — opinions differ. But not making good on federal obligations is also breaking the law. And if House Republicans are pushing the president into a situation where he must break the law no matter what he does, why not choose the version that hurts America least?"

Query: What would be the effect on the US dollar and the world economy of such a move by Obama? Would it really be that much better than default? There would still be an economic crash.

In addition, the question would then arise whether Obama had staged a "coup," meaning an unlawful seizure of power and not a brilliant stroke of genius.

Yup, Paul, that would almost be as successful as minting that trillion dollar platinum coin.

Ah, yes, the "stuff" that Nobel Prizes are made of . . .

Gail Collins, "First, the Good News": Will There Be Survivors After the Titanic Again Goes Down?

Has the Titanic, i.e. the US government, hit an iceberg, i.e. the debt ceiling, and is it about to go down? Will there be time for any of the passengers to board the lifeboats? Meanwhile, the ships musicians continue to play for the benefit of all aboard, who will soon be drowning in the freezing Atlantic, and a comedian by the name of Gail Collins, persists, from the ship's deck already awash with water, with her one-woman show, poking fun at those responsible for this navigational disaster.

In her latest New York Times op-ed entitled "First, the Good News" (http://www.nytimes.com/2013/10/10/opinion/collins-first-the-good-news.html?_r=0), Collins, who wears partisan blinders, again casts aspersions against those nefarious Republicans. Collins concludes:

"Good news: The Congressional gym is open.

O.K., possibly only good news if you are a member of Congress. Or a person who enjoys making fun of members of Congress.

Good news: The Centers for Disease Control and Prevention called back some of its furloughed employees to try to control that salmonella outbreak.

Bad news: Most of the C.D.C. is still at home, including the ones who work on flu.

And our moral is: Get your flu shot, people. Cook your chicken well. Cross your fingers and pray."

Yup, the Congressional gym is open, and so is Obama's golf course on Andrews Airforce Base (see: http://www.breitbart.com/InstaBlog/2013/10/06/Obama-s-Golf-Course-Has-Been-Spared-from-the-Shutdown).

But too much is at stake to waste time with name-calling. Enough nonsense.

It's high time for Obama and Republican Congressional leaders to hold round-the-clock talks to achieve a compromise before it's all too late.

Who's to blame?

I don't care. We're not in kindergarten. Settle it!

Thomas Friedman, "Our Democracy Is at Stake": In Hostage Situations, You Need a Skilled Negotiator

In his latest New York Times op-ed entitled "Our Democracy Is at Stake" (http://www.nytimes.com/2013/10/02/opinion/friedman-our-democracy-is-at-stake.html?_r=0), Thomas Friedman would have us know that the US government shutdown is a hostage situation. Friedman writes:

"This time is different. What is at stake in this government shutdown forced by a radical Tea Party minority is nothing less than the principle upon which our democracy is based: majority rule. President Obama must not give into this hostage taking — not just because Obamacare is at stake, but because the future of how we govern ourselves is at stake.

. . . .

President Obama is not defending health care. He’s defending the health of our democracy. Every American who cherishes that should stand with him."

Okay, suppose we are dealing with a hostage situation. In such situations, in order to avoid great damage, a skilled negotiator is brought in to to reach a desired outcome, which does not endanger the hostages and cause unanticipated damage.

The health of America's democracy? As a skilled negotiator, I don't even want to go there. Given the severity of the crisis, it's irrelevant to me.

How we got into this hostage situation? Who is to blame? Again, as a skilled negotiator, I want to put this to the side. We can discuss it at a later date, when the crisis has been defused.

The two sides are unwilling to talk and the potential for damage is mounting? Let me step in and start to talk, calmly and objectively, so that egos don't get in the way of a solution.

Where to begin? Let me find where there is any meeting of the minds, no matter how small. How about the welfare of the United States? Are there even minor concessions that both sides can make?

Obama is defending the health of America's democracy? Every American should stand with him? Sorry, but these are platitudes, which will drive the two sides even further apart. To avoid a looming disaster, bring in a skilled negotiator, capable of reaching a compromise, with a history of deal making, and let him/her get to work.

Paul Krugman, "Rebels Without a Clue": Obama Should Be Setting His House in Order

In any household, there are arguments, some of them bitter. I suppose that is why I recently printed out 100 square pieces of paper to have them ready in case of need. On one side: "To my darling wife, with all my heart." On the other side: "I apologize." You see, I believe in effective, real-time communication when problems arise, as they regularly do.

In his latest New York Times op-ed entitled "Rebels Without a Clue" (http://www.nytimes.com/2013/09/30/opinion/krugman-rebels-without-a-clue.html?_r=0), Paul Krugman  tells us that "a U.S. government default, which will happen unless Congress raises the debt ceiling soon, might cause financial catastrophe." Krugman explains:

"Financial markets have long treated U.S. bonds as the ultimate safe asset; the assumption that America will always honor its debts is the bedrock on which the world financial system rests. In particular, Treasury bills — short-term U.S. bonds — are what investors demand when they want absolutely solid collateral against loans. Treasury bills are so essential for this role that in times of severe stress they sometimes pay slightly negative interest rates — that is, they’re treated as being better than cash.

Now suppose it became clear that U.S. bonds weren’t safe, that America couldn’t be counted on to honor its debts after all. Suddenly, the whole system would be disrupted."

Well, I agree that a US government default would be a disaster, but unlike Krugman, I also believe that US bonds already aren't safe, and one need go no further than the Congressional Budget Office to learn why. As stated by the non-partisan CBO earlier this month with regard to America's financial future (http://www.cbo.gov/publication/44521):

"Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects. After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy (see the figure below). Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely."

"Debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely"? It's down the road, but it sounds to me as if US bonds already are not "the ultimate safe asset."

What to do? Listen. Communicate. Compromise. Not just play tough guy with House Republicans while running after Rouhani and then bragging about an "earth shaking" 15-minute phone call, replete with platitudes.

Instead of running after Rouhani, Obama should be setting his House in order.

Gail Collins, "Congress Cracks Up": Does America Have a "Debt Problem and a Failure of Leadership"?

Threaten the full faith and credit of the US by refusing to raise the debt ceiling? Yes, I know, US debt is on the path to becoming unsustainable. As stated by the non-partisan Congressional Budget Office earlier this month with regard to America's financial future (http://www.cbo.gov/publication/44521):

"Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects. After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy (see the figure below). Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely."

But threaten a crack-up of the none-too-strong economy with such a measure? Who would be foolish enough to engage in such brinkmanship?

In her latest New York Times op-ed entitled "Congress Cracks Up" (http://www.nytimes.com/2013/09/28/opinion/collins-congress-cracks-up.html?_r=0), Gail Collins chastises US House Republicans for engaging in such dangerous games. Collins writes:

"So, what do you think is wrong with these people? Thanks to gerrymandered Congressional districts and the Tea Party, we do seem to have a surprising number of elected officials who actually don’t believe that raising the debt limit so the government can pay its bills is a good plan."

But consider Senator Obama’s Floor Speech on March 20, 2006, before he voted against raising the debt ceiling:

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

As we were told in January 2011 by Andrew McCarthy in his National Review column "The Corner" (http://www.nationalreview.com/corner/256288/senator-barack-obama-explaining-his-2006-vote-against-raising-debt-limit-andrew-c-mcca), regarding this declaration by Senator Obama:

"At the time, Senator Obama was urging Congress not to tolerate an increase that would bring the debt ceiling to $9 trillion. Under President Obama, the debt ceiling has been raised to $14.3 trillion. Even without counting most unfunded liabilities, the national debt is now calculated to be nearing $14.1 trillion."

Well, we are no longer in 2006, when US national debt was nearing $9 trillion. We are no longer in 2011, when US national debt was some $14 trillion. Rather, we are now late into 2013, and US national debt is just a whisker under $17 trillion.

Does "America have a debt problem and a failure of leadership"? Do "Americans deserve better"? How about some answers, Gail.

Paul Krugman, "The Chutzpah Caucus": Stimulating (Yawn . . .)

As observed by Paul Krugman in a December 2012 New York Times op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position." Well, US debt is currently more than $16.8 trillion, and gross US debt is some 107% of America's G.D.P. Those "fools" at the nonpartisan Congressional Budget Office have warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook). Sure, the American Taxpayer Relief Act and the sequester may have delayed "achievement" of that 200% debt to G.D.P. ratio by a few years; however, as acknowledged by the Peterson Foundation (http://www.pgpf.org/Issues/Fiscal-Outlook/2013/01/fiscal-cliff-atra-2012-long-term-analysis.aspx), we're still headed for that astronomical percentage by 2040.

Today, in his latest New York Times op-ed entitled "The Chutzpah Caucus" (http://www.nytimes.com/2013/05/06/opinion/krugman-the-chutzpah-caucus.html?_r=0), Paul Krugman again attacks those who call for austerity (yawn . . .) and claims that governments engaged in stimulus can "change course in the future."

Stimulus? It's only a small part of the problem. As prophetically observed by the Social Security Advisory Board in September 2009 (http://www.ssab.gov/documents/TheUnsustainableCostofHealthCare_508.pdf):

"[W]e are acutely aware that over the next 20 years, the United States population will become significantly older as the baby boom generation leaves the workforce and enters retirement. However, an aging population is not the whole story. Health care costs are growing across the economy, and many of the same factors that are spurring overall health care growth, whether new technologies or inefficient delivery systems, are also driving up the cost of Medicare and Medicaid to unprecedented levels. The burden of health care costs on the country as a whole will continue to grow unless and until we alter the efficiency and efficacy of our health care systems.

For these reasons and more, we believe that it is essential that policymakers take action to restrain the rising cost of health care in ways that also lead to better quality of care. It is an issue that is at the very heart of the long-term economic security of the American public. It is urgent that action be taken and the time for action is now."

Will Obamacare prove a panacea vis-a-vis concerns over spiraling health care costs? I don't think so. As observed by a recent Huffington Post article (http://www.huffingtonpost.com/2013/03/26/obamacare-medical-claims-costs_n_2956986.html):

"Insurance companies will have to pay out an average of 32 percent more for medical claims on individual health policies under President Barack Obama's overhaul, the nation's leading group of financial risk analysts has estimated.

. . . .

While some states will see medical claims costs per person decline, the report concluded the overwhelming majority will see double-digit increases in their individual health insurance markets, where people purchase coverage directly from insurers.

The disparities are striking. By 2017, the estimated increase would be 62 percent for California, about 80 percent for Ohio, more than 20 percent for Florida and 67 percent for Maryland. Much of the reason for the higher claims costs is that sicker people are expected to join the pool, the report said."

Or, as the Democratic Senate Finance Committee Chairman Max Baucus more recently said of Obamacare (see: http://www.huffingtonpost.com/2013/04/17/max-baucus-obamacare_n_3101801.html):

"I just see a huge train wreck coming down."

Does this sad story have a silver lining? Absolutely: President Obama is destined to make economic history. As observed by Krugman in today's opinion piece:

"The key measure you want to look at is the ratio of debt to G.D.P., which measures the government’s fiscal position better than a simple dollar number. And if you look at United States history since World War II, you find that of the 10 presidents who preceded Barack Obama, seven left office with a debt ratio lower than when they came in. Who were the three exceptions? Ronald Reagan and the two George Bushes. So debt increases that didn’t arise either from war or from extraordinary financial crisis are entirely associated with hard-line conservative governments."

And so, in another three and a half years, Barack Obama will become the first Democratic president since World War II to leave office with a debt ration higher than when he came in.

Congratulations to all . . .

Paul Krugman, "The Story of Our Time": In God We Trust, But Those Green Pieces of Paper?

In his latest New York Times op-ed entitled "The Story of Our Time" (http://www.nytimes.com/2013/04/29/opinion/krugman-the-story-of-our-time.html?_r=0), Paul Krugman twice declares that the US is in a "depression," "a once-in-three-generations financial crisis," and proffers "a sort of refresher on the nature of our economic woes, and why this remains a very bad time for spending cuts." Krugman explains:

"Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.

Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too."

Thus, according to Krugman, "this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again."

And it's the bad guys who oppose Krugman:

"[P]owerful people don’t want to believe it. Some of them have a visceral sense that suffering is good, that we must pay a price for past sins (even if the sinners then and the sufferers now are very different groups of people). Some of them see the crisis as an opportunity to dismantle the social safety net. And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain."

Good versus bad? How puerile. Get real, Paul.

There are also those who believe that relative to the size of the US economy, there is too much federal debt outstanding. As observed by Krugman himself in an earlier op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position." US debt is currently more than $16.8 trillion, and gross US debt is some 107% of America's G.D.P. Those "fools" at the nonpartisan Congressional Budget Office have warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook). Sure, the American Taxpayer Relief Act and the sequester may have delayed "achievement" of that 200% debt to G.D.P. ratio by a few years; however, as acknowledged by the Peterson Foundation (http://www.pgpf.org/Issues/Fiscal-Outlook/2013/01/fiscal-cliff-atra-2012-long-term-analysis.aspx), we're still headed for that astronomical percentage by 2040.

Bottom line, if the federal government takes too many loans premised upon its ability to print additional pieces of green paper declaring "IN GOD WE TRUST" or upon the minting of a platinum coin (see: http://jgcaesarea.blogspot.co.il/2013/04/paul-krugman-lust-for-gold-what.html), we can only hope that people will continue to declare their trust in God, as they wheel piles of green paper to the grocery store to buy a loaf of bread.

Paul Krugman, "The Excel Depression": Up the Creek Without a Paddle

When examining America's ratio of debt to G.D.P., is there a magic number beyond which the US should not go? At my age, I no longer "believe in magic in a young girl's heart" or any other magic for that matter. But as much as I don't believe in magic, I think one has to be obtuse not to acknowledge that the ratio of debt to G.D.P. in the US is currently in the stratosphere and is indicative of the fact that US debt is unsustainable.

In his latest New York Times op-ed entitled "The Excel Depression" (http://www.nytimes.com/2013/04/19/opinion/krugman-the-excel-depression.html?_r=0), Paul Krugman seeks to rip holes in a 2010 paper by two Harvard economists, Carmen Reinhart and Kenneth Rogoff, entitled "Growth in a Time of Debt," which claimed that when debt exceeded 90 percent of G.D.P., economic growth plummeted. Krugman writes:

"As soon as the paper was released, many economists pointed out that a negative correlation between debt and economic performance need not mean that high debt causes low growth. It could just as easily be the other way around, with poor economic performance leading to high debt. Indeed, that’s obviously the case for Japan, which went deep into debt only after its growth collapsed in the early 1990s.

Over time, another problem emerged: Other researchers, using seemingly comparable data on debt and growth, couldn’t replicate the Reinhart-Rogoff results. They typically found some correlation between high debt and slow growth — but nothing that looked like a tipping point at 90 percent or, indeed, any particular level of debt.

Finally, Ms. Reinhart and Mr. Rogoff allowed researchers at the University of Massachusetts to look at their original spreadsheet — and the mystery of the irreproducible results was solved. First, they omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error. Correct these oddities and errors, and you get what other researchers have found: some correlation between high debt and slow growth, with no indication of which is causing which, but no sign at all of that 90 percent 'threshold.'"

Okay, so there is no magical 90 percent threshold. However, as observed by Krugman in an earlier op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position."

What does the Congressional Budget Office have to say? In a February 2013 report entitled "The Budget and Economic Outlook: Fiscal Years 2013 to 2023" (http://www.cbo.gov/publication/43907), it informs us:

"With revenues expected to rise more rapidly than spending in the next few years under current law, the deficit is projected to dip as low as 2.4 percent of GDP by 2015. In later years, however, projected deficits rise steadily, reaching almost 4 percent of GDP in 2023. For the 2014–2023 period, deficits in CBO’s baseline projections total $7.0 trillion. With such deficits, federal debt would remain above 73 percent of GDP—far higher than the 39 percent average seen over the past four decades. (As recently as the end of 2007, federal debt equaled just 36 percent of GDP.) Moreover, debt would be increasing relative to the size of the economy in the second half of the decade."

Translation without expletives: We're up the creek without a paddle.

Paul Krugman, "Kick That Can": No Longer "Yes We Can"

You want a poignant indication of the severity and danger of America's debt problem? You need look no further than measures being taken by the State of Virginia to issue its own currency (see: http://www.washingtonpost.com/business/economy/virginia-coin-moves-closer-to-reality/2013/02/05/9bcdd532-6fa4-11e2-ac36-3d8d9dcaa2e2_story.html?hpid=z4).

You want another indication? Even Paul Krugman is now acknowledging that the US economy is in a shambles and that debt needs to be brought under control.

In his latest New York Times op-ed entitled "Kick That Can" (http://www.nytimes.com/2013/02/08/opinion/krugman-kick-that-can.html), Krugman grudgingly admits that "we will eventually need some combination of revenue increases and spending cuts to rein in the growth of U.S. government debt." Krugman, however, claims that this is not the time for the federal government to swallow its medicine:

"Given the state we’re in, it would be irresponsible and destructive not to kick that can down the road.

Start with a basic point: Slashing government spending destroys jobs and causes the economy to shrink.

. . . .

[F]iscal austerity should wait until the economy has recovered, and the Fed can once again cushion the impact."

But has spending by the Obama administration over the past four years created jobs? Are there signs of an economic recovery anywhere in sight? Is it possible that short-term, or even medium-term, the economy is not going to recover?

"Given the state we're in," some sort of economic plan is necessary, but meanwhile, Obama is surrounding himself with a cabinet of the worst and dumbest, a harbinger of further intellectual and economic stagnation.

Paul Krugman, "The Big Fail": Whose "Colossal Failure"? Go Ahead, He's Been Re-elected and You Can Say His Name

In his latest New York Times op-ed entitled "The Big Fail" (http://www.nytimes.com/2013/01/07/opinion/krugman-the-big-fail.html?_r=0), Paul Krugman concludes:

"The truth is that we’ve just experienced a colossal failure of economic policy — and far too many of those responsible for that failure both retain power and refuse to learn from experience."

Although Krugman tells us that "political leaders — and all too many economists — chose to forget or ignore what they should have known," there is of course no mention of His Highness, Obama. I suppose that it has dawned on Paul that it is getting late in the game to continue blaming Bush, and he decided to leave the name of the current US president, responsible for the country with the world's largest economy, out of his discussion.

Krugman's answer to all the world's travails - yawn - spend, spend, spend. His illustrative example this time:

"For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar.

So what can be done? A smaller financial shock, like the dot-com bust at the end of the 1990s, can be met by cutting interest rates. But the crisis of 2008 was far bigger, and even cutting rates all the way to zero wasn’t nearly enough.

At that point governments needed to step in, spending to support their economies while the private sector regained its balance."

However, as observed by Paul in an earlier op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position." Well, US debt is currently more than $16.4 trillion, which is more that 100% of America's G.D.P., and those "fools" at the nonpartisan Congressional Budget Office also recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook).

Does Paul really think that debt will ever be repaid? I don't.

And when a government issues debt that is not going to be repaid, i.e. prints money, the value of all money in circulation among the American public declines.

Print ever larger amounts of money, which become worth steadily less? Also problematic, or even a recipe for disaster.

Indeed, sometimes there are no good answers.

Paul Krugman, "When Prophecy Fails": Confusing Doomsday With a Slow and Agonizing Decline

As December 21 approached, my wife, who had been cautioned by her spiritual guru regarding the significance of the date and the possibility of an impending calamity, told me that the Mayans were a very wise tribe. "Yes," I replied, "and they practiced human sacrifice." To which my wife rejoined, "They also had the good sense to replace their spouses every seven years."

December 21 has come and gone, and what new nonsense will be next to arrive on the scene? The answer was quick in coming: Paul (Spend! Spend! Spend!) Krugman's latest New York Times op-ed entitled "When Prophecy Fails" (http://www.nytimes.com/2012/12/24/opinion/krugman-when-prophecy-fails.html?_r=0). The good doctor writes:

"Seriously, at every stage of our ongoing economic crisis — and in particular, every time anyone has suggested actually trying to do something about mass unemployment — a chorus of voices has warned that unless we bring down budget deficits now now now, financial markets will turn on America, driving interest rates sky-high. And these prophecies of doom have had a powerful effect on our economic discourse.

. . . .

The key thing we need to understand, however, is that the prophets of fiscal disaster, no matter how respectable they may seem, are at this point effectively members of a doomsday cult. They are emotionally and professionally committed to the belief that fiscal crisis lurks just around the corner, and they will hold to their belief no matter how many corners we turn without encountering that crisis."

Yet another JG Caesarea challenge: Which untoward, albeit not cataclysmic, event does Paul fail to mention in his opinion piece? One . . . two . . . three. Sorry, time's up. As reported by The Washington Post on August 5, 2011 (http://articles.washingtonpost.com/2011-08-05/business/35417342_1_downgrade-aaa-credit-ratings-government-debt):

"Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said 'political brinkmanship' in the debate over the debt had made the U.S. government’s ability to manage its finances 'less stable, less effective and less predictable.' It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings 'fell short' of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future."

So, the US credit rating was downgraded for the first time. A disaster? No. I'm still delighted to be paid in US dollars. But what will the next downgrade bring?

I don't believe in a doomsday, because the US government can always print more money. Rather, I believe that inasmuch as US debt is fast growing unsustainable, America's economic demise will be slow and painful.

Krugman himself told us in a very recent opinion piece (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0) that the ratio of debt to G.D.P. is "the best measure of our debt position." Well, those "fools" at the nonpartisan Congressional Budget Office also recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook).

Doomsday? No. Most likely our children and grandchildren will watch as the magnificent edifice crumbles.

Paul Krugman, "That Terrible Trillion": Dr. Evil (Me) in a Cosmic Battle Against the Good Dr. K

Yup, another JG Caesarea challenge: Read Paul Krugman's latest New York Times op-ed entitled "That Terrible Trillion" (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0) and tell me what's missing.

One . . . two . . . three. Sorry, time's up.

In his learned opinion piece, Dr. Krugman refers to his fiscal policy discussions in which his archvillain adversary, "Dr. Evil," inevitably will "announce, in dire tones, that we have a ONE TRILLION DOLLAR deficit." Krugman goes on to say that "budgets don’t have to be balanced to be sustainable" and that the ratio of debt to G.D.P. is "the best measure of our debt position."

Observing that "we would have a stable or declining ratio of debt to G.D.P. even if we had a $400 billion deficit," Krugman concludes:

"Which brings us back to ONE TRILLION DOLLARS.

We do indeed have a big budget deficit, and other things equal it would be better if the deficit were a lot smaller. But other things aren’t equal; the deficit is a side-effect of an economic depression, and the first order of business should be to end that depression — which means, among other things, leaving the deficit alone for now.

And you should recognize all the hyped-up talk about the deficit for what it is: yet another disingenuous attempt to scare and bully the body politic into abandoning programs that shield both poor and middle-class Americans from harm."

Hold your horses, Paul. Who said anything about "abandoning programs that shield both poor and middle-class Americans from harm"? How about first putting an end to America's inane ground war in Afghanistan, which Obama foolishly escalated and which is currently costing the US some $6 billion per month?

But let's examine Paul's proposition on a micro basis. Do you have a mortgage? I do. And before granting me that mortgage, my "friendly" bank of course examined my earning power, my assets, and whether I would ever be able to return the funds received from them. However, regarding federal debt, Paul does not examine possible repayment. Rather, he would have us believe that it is sufficient that debt be kept within a proportion of G.D.P. Moreover, Paul is correct: Worst case scenario, the US federal government can always print more money to pay its debts - something Jeffrey cannot legally do - with debilitating consequences for the value of the dollar.

On the other hand, Jeffrey also has an advantage: He can sell his house to pay off his mortgage - something the federal government cannot do, unless it decides to sell Alaska back to Russia (or China). And for this reason, Jeffrey's credit rating is still solid.

But again I find myself meandering. What didn't the good Dr. K tell us in his opinion piece? Although he of course refers to a deficit of "ONE TRILLION DOLLARS," somehow he manages to forget that President Obama has added, over the course of only three and a half years, some $5 trillion to America's total debt of more than SIXTEEN TRILLION DOLLARS.

Heck, one trillion, sixteen trillion -- what's the difference? It will never be repaid anyway.

Paul Krugman, "Nobody Understands Debt": Don't Worry, Be Happy

In his latest New York Times op-ed entitled "Nobody Understands Debt" (http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?ref=opinion), Paul Krugman tells us - again - that the US should spend its way out of the current recession. Paul tells us:

"when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least."

You see, only Paul in New York, who writes almost exclusively about debt, knows anything at all about the subject.

Explaining that the US need not fear its debt to other countries, Krugman writes:

"It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners."

Or in other words, I owe them, they owe me, and everything is hunky dory. But unfortunately, there's a fly in this ointment.

For example, Egypt, which owed the US $3.6 billion, came knocking on Washington's door this past May seeking forgiveness of its entire debt, and the Obama administration decided to provide $1 billion in relief (see: http://www.washingtonpost.com/national/administration-planning-1-billion-debt-relief-for-egypt/2011/04/28/AF1m4FLG_story.html). Does anyone really believe that Egypt is "good" for the remaining $2.6 billion?

Better yet, for Paul's benefit, let me explain it differently: Suppose you borrow $100 from Switzerland, one of the world's richest countries, and at the same time loan $100 to the Democratic Republic of the Congo, one of the world's poorest countries. Perhaps on your books, you can try to balance the $100 liability against the $100 asset, but the reality is that there is a good chance that there will be a default on your asset. Your books might say that your assets and liabilities are balanced; however, country risk tells you otherwise.

Krugman claims to be the one and only expert on debt, but apparently doesn't understand country risk, which factors into all international banking arrangements and determinations of overall credit risk.

Don't worry, be happy.

Joe Nocera, "While the Markets Swoon ...": Bush Is Still to Blame

Voicing discontent with Obama's "uninspired" speech on Monday, Joe Nocera, in his latest New York Times op-ed, "While the Markets Swoon ... (http://www.nytimes.com/2011/08/09/opinion/nocera-while-the-markets-swoon.html?hp), would have us know that the economic crisis is the fault of George W. Bush:

"Has any president in American history left behind as much lasting damage as George W. Bush? In addition to two unfinished wars, he also set us on the path to our current financial mess."

Okay, Bush is to blame, but Obama was elected to end the wars and guide us out of the morass. This hasn't happened.

In its editorial entitled "Past Time for a New Agenda" (http://www.nytimes.com/2011/08/09/opinion/past-time-for-a-new-agenda.html?_r=1&hp), The New York Times today rails against the Republicans in its efforts to shift the blame for the economic debacle. Is "I didn't do it" shaping up to be the theme of the 2012 Obama reelection campaign?

What a shame that Obama is not being challenged in the primaries by Hillary.