Here’s the question: Can the custodian of the world’s reserve currency keep running deficits to the end of time with no downside to its economy? Here’s one answer:
Paul Krugman was asked whether he thought the U.S. was ‘in danger of a collapse, a stall, a crisis.’
‘No, there’s a whole bunch of reasons why that’s not true. First of all … that trillion dollar deficit is overwhelmingly the result of a depressed economy, and when the economy’s depressed, it’s good to run a deficit. You don’t want the government to try and balance its budget right now,’ Krugman said.
C-SPAN showed a video of former GOP vice presidential candidate Rep. Paul Ryan (R-Wis.), speaking at the National Review Institute in Washington, D.C., on dangers of debt.
‘We spend a trillion dollars more than we take in each year. We can’t keep that up. If we stay on this path, we will run the risk of a debt crisis. What is that? That’s a moment where our finances collapse, our economy stalls. We will have to convince the country to change course,’ Ryan said.
‘The story Ryan is trying to tell just doesn’t actually make sense. There are no historical counterparts to the story he claims we’re at risk of, and of course, Ryan himself desperately, desperately is concerned about the deficit but won’t accept one penny in additional revenue to deal with it,’ said Krugman, winner of the Nobel prize in economics and author of End This Depression Now.
‘All he really wants is to cut spending. If it comes to making any sacrifice on what he cares about, which is taxes, he’s not willing to make that sacrifice,’ added Krugman.
Watch the video here. But is there an actual reason – some economic theory, say – that explains why the US won’t turn into Zimbabwe or the Germany of 1921 if it keeps printing money with no productivity to back it up? Bizarre.