...But a rapid descent into hell was imminent. Former CBO director Douglas Holtz-Eakin was next, talking about the need to "repair" social security and Medicare. The United States has all the characteristics of countries that run into trouble, he said. Then he warned that the US is going to end up like Greece. This is one of the dumbest things that anyone with an economics degree can say.
Hello, Mr Holtz-Eakin! Have you ever heard of the US dollar, the world's key reserve currency?
The United States is not going to end up like Greece, any sooner than it will end up like Haiti or Burkina Faso. A country that can pay its foreign public debt in its own currency and runs its own central bank does not end up like Greece.
In fact, even Japan is not going to end up like Greece, and Japan has a gross public debt of about 220% of its GDP, more than twice the size of ours and vastly larger – again, relative to its economy – than that of Greece. And the yen is nowhere near the dollar in its importance as an international reserve currency. But the Japanese government is still borrowing at just 1% interest rates for its ten-year bonds.
At this point, it was clear that this panel, other than Blinder, was living in a dystopian fantasy world....
Read it at The Guardian (UK)The economic idiocy of economists
by Mark Weisbrot