Monday, May 16, 2011

Federal Debt: The US is no PIGS

I am probably worried more than the average American is when it comes to federal debt.

But, listening to news reports, I am concerned that they could mislead many of my fellow citizens into thinking that all the trillions and trillions of government debt is owned by foreigners. (editor: there is your problem--listening to the news!)

Note that the most significant part of this pie is owned locally.  As Reason put it in its typically sarcastic tone, "70 percent of the debt is held by domestic suckers and by elements of our trusted and trustworthy government."


This domestic versus external debt makes a hell of a difference.  Greece or Ireland is in trouble because of the overwhelming proportion of external debts, as in the figure below:


 It is highly probably that Paul Krugman wrote about this and I missed out on it; damn!

That we should begin to slim down the debt, by tackling the underlying causes, is a no-brainer.  The questions are how and, more importantly, when?  I am not sure if this is the right time to start a dramatic diet overhaul.

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