I could hold a political rant about governments running up debts, but I really question whether this is just artificial panic whipped up by speculators.
If a country like Italy, which is the latest subject of panic, has debts of 119% of gdp, is that really a problem? Given that those debts were incurred while Italy had a good credit rating, that would mean they're required to spend about 7 and a half percent of GDP on interest payments. OK, so really you'd be better off spending that on education, infrastructure and other nice things, but nevertheless; is this really a problem? Most homeowner households have a mortgage of about 300% to 400% of household income, taken out at higher interest rates than developed country governments, and yet most service the interest without problems. Many businesses or business owners are 'leveraged' to much more than twice their turnover, but continue to be profitable. Governments own a tremendous amount of assets, like land, valuable buildings, art collections, vehicles, ships, hairyplanes, large businesses and bonds issued by other governments including those with good credit ratings. Some of those assets could be sold to pay off debts.
So why the panic?
Am I the only one who suspects this panic is actually being whipped up to a large extent by those who are speculating on other things like gold, Credit Default Swaps or Asian economies/currencies?
If a country like Italy, which is the latest subject of panic, has debts of 119% of gdp, is that really a problem? Given that those debts were incurred while Italy had a good credit rating, that would mean they're required to spend about 7 and a half percent of GDP on interest payments. OK, so really you'd be better off spending that on education, infrastructure and other nice things, but nevertheless; is this really a problem? Most homeowner households have a mortgage of about 300% to 400% of household income, taken out at higher interest rates than developed country governments, and yet most service the interest without problems. Many businesses or business owners are 'leveraged' to much more than twice their turnover, but continue to be profitable. Governments own a tremendous amount of assets, like land, valuable buildings, art collections, vehicles, ships, hairyplanes, large businesses and bonds issued by other governments including those with good credit ratings. Some of those assets could be sold to pay off debts.
So why the panic?
Am I the only one who suspects this panic is actually being whipped up to a large extent by those who are speculating on other things like gold, Credit Default Swaps or Asian economies/currencies?
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