Nobel laueate economist Paul Krugman explains the following in a column “Nobody Understands Debt”:
…“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. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation…
Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves…
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. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction.” … (more)
WATCHDOG: A wag of the tail to the Intell for carrying Krugman’s learned columns.
Even more fundamental to Paul Krugman’s observation that “Nobody understands Debt” is that nobody really understands money. This understandable ignorance allows for a host of opinions about economics that may be totally wrong but which drive U.S. policy like frenzied national car crash derby. The damage, however, is worse .. .far worse.
It is an understandable ignorance because who really gets taught economics, and a basic understanding of money, business and banking, including how the federal reserve really works? No High school that I know of, and, even colleges only have (for the vast majority of their students) a basic elective course in economics, that like most “survey” courses, “surveys the landscape” with little or no real understanding of any part of it.
If “the business of America is business” should not everyone be taught an ideology-free understanding of how our economic system works? If the only “professors” of economics for the masses are TV entertainers, who feed the warfare of ideas to give their listeners an adrenalin rush (pun intended). If so, then ignorance simply feeds on itself and so we have today’s Gladiator pit of political discourse.
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Last year I called the Washington office of Congressman Pitts to ask that he allow the Bush tax cuts to expire as the law that created them required. I spoke with a “senior staff” person who told me that allowing them to expire would constitute a “tax increase” that the congressman could not abide. I made some counter points which he said were a matter of opinion. But is not the congressman view a matter of opinion, I asked. He then said that “everything in politics was a matter of opinion”.
Really? Everything? Our political decisions on war and peace, economics, justice, basic values, and a host of other domestic and international policies, just a matter of opinion? Is this what we have come to? A cacophony of voices each demanding to become national policy on the basis that any opinion is as good as, and therefore, as entitled as, any other?
We live in a culture where Paul Krugman, a professor of economics, and a Nobel Prize winner in that field, has no more claim on economic reality than I do . . . than anyone does. There is not a shopkeeper, truck driver, priest, politician, or oligarch who cannot discount anything Paul Krugman has to say about economics or anything else. Political reality, truth, and national policy is determined in our national Gladiator pit of political warfare where the triumphant carry the biggest, loudest, and most expensive weapons . .. and “reality”, like the reality of our national interest, for example, be damned! Do facts matter? Whose facts? Does error have consequences? Consequences for whom? Consequences for all of us? Or just the 99%?