Global Debt Relative to GDP
By Barry Ritholtz - April 12th, 2010, 2:30PM
In terms of National (versus State) debt levels as compared to GDP, have a look at the cartogram below. Europe makes the USA look like a group of pikers!
There are obvious factors of economic robustness and currency that are at play here, but wow, the Europeans, Canadiens and Japanese can almost make profligate Americans feel good about themselves!
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Hat tip Paul
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April 12th, 2010 at 3:42 pm
What about unfunded liabilities? The US @<6o% probably doesn't include this year, Fannie/Freddie, SS, Medicare et al. Does any part of Europe or Japan account for their pension obligations by any chance in the cartoon?
Makes me feel good about having recently bought a 5yr Aussie bond.
April 12th, 2010 at 3:59 pm
I am surprised to see Canada in the > 60% group. I had not previously heard anything about government debt in Canada. Serious comment, as I consider Canada to be a well run and stable country.
April 12th, 2010 at 4:08 pm
This does not take into account household and corporate (financial and non-financial) debt. On that basis our total debt/GDP is at a high of 369% giving the profligate Club Med Europeans a run for the money but Japan taking the cake is in the stratosphere of 530%. Of course the Japanese have financed their debt domestically until now but with their savings rate pushing zero and their pension fund paying out more than they take due to declining and aging population they could a hit a serious funding crisis if rates for JGBs start to rise even by 100-200 basis.
In any case when looking at the BIS data that BR linked to a few days ago and the unfunded federal liabilities and the 2 trillion dollar hole in state public employee pension funds – we should be looking at a funding crisis in our future. But these days it seems Uncle Bennie manning the electronic printing press is sufficient for the markets to rollover our debt at low yields. When that sentiment changes it would be “batten down the hatches” time!
April 12th, 2010 at 4:31 pm
[...] Disclosures « Global Debt Relative to GDP [...]
April 12th, 2010 at 4:39 pm
This map looks like something from Dr. Seuss.
April 12th, 2010 at 4:58 pm
More like spin-art.
April 12th, 2010 at 5:02 pm
Is that the official World Cup ball for South Africa?
April 12th, 2010 at 5:09 pm
Did anyone else notice how much Europe looks like an, er um, bubble?
And how Australia and Asia (or is that Australasia?) have low debt levels?
April 12th, 2010 at 5:16 pm
I’m sure that holders of G7 government debt will beat holders of gold over the next 10 years.
That’s because, any day now, voters will demand to have their taxes raised, and benefits cut.
April 12th, 2010 at 5:19 pm
Canada’s debt to GDP is almost twice that of the US?
I wonder if that’s still the case today
April 12th, 2010 at 5:38 pm
guys this map is not telling the whole truth….statistics
but the message is clear
gr N
April 12th, 2010 at 6:22 pm
Re Canada, it depends on what your definition of debt is. National debt to GDP is roughly 34%.
If you consider the total debt burden including all liabilities of all government institutions in the country, the picture is somewhat worse. The chart above appears to consider *gross* debt as opposed to net debt. I’m not so sure that failing to account for funded liabilities makes much sense, but if one is only going to use OECD or IMF comparisons which are done on that basis, you get a map such as the above. One would imagine managers like PIMCO who have adopted Canada are adept at finding the necessary details.
The picture in Canada is light years ahead of where we were in the early 90′s, thanks to both robust economic growth and spending curtailment by the former Liberal (generally fiscally conservative) government over many years (something the current *Conservative* government has undone… spending and spending growth on their watch is now at its highest in years).
That all said our economic picture is generally more positive than most OECD nations and provided a depression doesn’t lie directly ahead, our commodity driven economy is likely to remain so.
Some say we are due for a housing bubble burst. Who knows. Prices in most locales including the most heated are actually above 2008 levels now. Whether the rush of sellers that is sure to entice allow the market to remain as such is yet to be seen.
April 12th, 2010 at 6:33 pm
This chart repels the mind. Can some explain to the layman how this is possible? How can every player in the game be in debt simultaneously?
I’m guessing maybe a huge chunk is internal central bank buying of debt, but even minus that, how do you account for all of this?
This pus into question the nature of the definition of debt itself. Is debt really debt when the debtor owns a printing press? Don’t we need a new definition? I’d like to say that this really shows strength of currency, but since currency valuation is relative, it’s all becoming worthless in terms of something fixed. Gold maybe, if it weren’t maniped.
Someone please let me know if my thinking is off base. Again, this repels the mind.
April 12th, 2010 at 6:43 pm
Mike – thanks for the clarification!
April 12th, 2010 at 6:54 pm
Does the debt include un(der)funded liabilities (Social Security, Medicare, Fannie Mae, Freddie Mac, etc) ?
April 12th, 2010 at 7:49 pm
Ah, statistics…
Does the chart include state and local debt? Are state and local debt financed the same way around the world, and accounted in the same way?
Does the chart include “off balance-sheet” liabilities? Are these accounted in the same way around the world?
Last and most important, debt must be paid by taxes. GDP doesn’t pay taxes, so comparing debt relative to GDP is apples-to-oranges. This chart would be better stated if it depicted debt relative to per capita income or household income.
April 12th, 2010 at 7:50 pm
THE QUESTION IS WRONG
When you go to a bank, they don’t take your debt and compare it to what you make plus what you spend, do they? GDP includes consumption. Consumption needs to be removed to get a reasonable comparison. So take 30% of the $14.2 trillion because our economy is 70% consumption. Debt is $12.8 trillion.
Therefore:
$12.8 / $4.26 = 300%
ie the on the books portion of Federal debt is now 300% of what we produce.
SHOCKING, HUH? You don’t even want to think about including entitlements promised, but not included in debt.
April 12th, 2010 at 8:06 pm
Debt/GDP is the most useless ratio in all of economics. Federal debt, which is the net money created by the federal government over the past 200 years, has absolutely nothing to do with GDP, which is a one year measure of productivity. This isn’t even an apples/oranges ratio. Its an apples/moonbeam ratio.
This phony bit of math has nothing to do with the government’s ability to pay its debts or the likelihood of inflation or the possibility of birds flying home for the winter. It is total, 100% bogus, explaining nothing and predicting nothing.
For a more complete explanation of this curiosity, see: http://rodgermmitchell.wordpress.com/2009/11/08/federal-debtgdp-a-useless-ratio/
Rodger Malcolm Mitchell
April 12th, 2010 at 8:16 pm
and i wonder if the debt in question is all debt not just government debt
April 12th, 2010 at 9:54 pm
In Norway’s case, the debt/GDP numbers tell you nothing of significance. According to the CIA factbook, the country has a gross external debt of $548.1 billion, a GDP of $276.5 billion, and a public debt of 60.2% of GDP, giving it a bright red color on the map.
However, it also happens to have a sovereign wealth fund, the Government Pension Fund Global, valued at some $470 billion — comfortably above its public debt. http://www.norges-bank.no/templates/article____69365.aspx
It typically runs a sizeable budget surplus — http://blogs.reuters.com/rolfe-winkler/2009/12/15/the-norway-trade/
April 12th, 2010 at 11:47 pm
@gravenewworld : I had the same thoughts concerning all of these countries being in debt. I have come to the conclusion that it is just like people who float checks from bank to bank when they have no funds.
If you have drained your accounts and you have no money you just write a check from one account to the next because it usually taked a day or two for the checks too proccess and as long as you continue to do this back and forth no one is the wiser until you stop. This is happening on a global scale and at this point nobody wants it to stop.
April 12th, 2010 at 11:54 pm
i don’t get it, I thought they had free health care bending the cost curve, plus all that great 1.5 multiplier spending? oh well, when I drove through paris in a taxi it doesn’t look like it’s in debt
April 13th, 2010 at 12:51 am
OkieLawyer – the whole pic looks like a bubble exploding. Like a single frame from a high-speed film of a bubble expoding.
I think that’s pretty accurate. A perfect freeze frame of our Extend and Pretend Global Village.
Pour Humpty…
April 13th, 2010 at 6:43 am
Regarding Canada’s economic outlook, I don’t agree that this government is spending more than the previous administrations. I feel that it is trying hard to contain the expenditures and yet working at getting over the recession. Look at the success it is garnering now.
April 13th, 2010 at 6:43 am
@ RodgerMitchell
Claiming that Debt to GDP ratio is the most useless ratio in all economics suggests how little you understand of economics. I’d say that there some ratios that are more useless, like the surface temerature of lake Michigan to the price of cocoa.
I read your article.
1) You totally confuse money with debt (starting with the title of your blog). They are not the same, sometimes they are the oposite. Would you rather like, as of tomorrow to have 100k dollars more of debt on your mortgage or 100k in banknotes in a suitcase?
2) You argue ad absurdum (like creating 10 trillion dollars one year, then nothing for the next 20 years). Such situation never takes place in real world, so why debate unrealistic scenarios?
3) You claim:
“The value of goods and services created by the private sector, has no relationship to the federal government’s ability to service its debt.”
That’s total nonsense – the government ability to service its debts is directly proportional to its revenues, which are highly correlated with tax revenues, which are very highly correlated to the value of goods and services created by the private sector. Especially in countries that get most of their revenues from Value Added Tax (which is all of Europe, China, India, Canada, Russia, Australia, Mexico, South Korea, New Zealand, essentially most of the World). No relationship?
It’s obvious that the ratio does not fully reflect the ability to service debts. Other considerations are important, like the competitiveness and flexibility of the economy, ratio of exports to foreign currency denominated debt etc.
Maciek.
April 13th, 2010 at 7:28 am
What a terrible stupid map, for the USA only the public traded debt is accounted leaving about 2362 billion in state and local government out.
(Source: http://www.federalreserve.gov/releases/z1/current/accessible/d3.htm )
And the 4000+ billion in US government trust funds is also left out.
If you include that the US Federal debt is way beyond 100% of GDP (or roughly the same magnitude of the US financial sector debt).
Why Barry posts nonsense like this I don’t know, if I want to read FOX channel financial news I go to the FOX channel and I don’t like it to find nonsense like this on this ‘Big Picture’ blog…
April 13th, 2010 at 7:59 am
MaciekKolodziejczyk,
1) All money is debt. Every economist knows this. Try to name one form of money that is not debt. The owner of debt is called a “creditor.” You confuse the creditor with the debtor.
2) The massive debts of WWII and of the Reagan era strongly affect today’s debt/GDP ratio, but last year’s GDP does not.
3) You said, “the government ability to service its debts is directly proportional to its revenues.” Not true. If that were true, the government could neither create nor service its $12 trillion debt. The government creates money out of thin air. It pays its bills by crediting the bank accounts of its vendors, which it can do endlessly. If the government did not collect a single dollar in taxes, it still would have no difficulty paying its bills. How do you think money was created in the first place?
Rodger Malcolm Mitchell
April 13th, 2010 at 8:57 am
The Looming European Debt Wars
By MICHAEL HUDSON
Government debt in Greece is just the first in a series of European debt bombs that are set to explode. The mortgage debts in post-Soviet economies and Iceland are more explosive. Although these countries are not in the Eurozone, most of their debts are denominated in euros. Some 87 per cent of Latvia’s debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. So their government borrowing by non-euro members has been to support exchange rates to pay these private-sector debts to foreign banks, not to finance a domestic budget deficit as in Greece.
All these debts are unpayably high because most of these countries are running deepening trade deficits and are sinking into depression. Now that real estate prices are plunging, trade deficits are no longer financed by an inflow of foreign-currency mortgage lending and property buyouts. There is no visible means of support to stabilize currencies (e.g., healthy economies).
For the past year these countries have supported their exchange rates by borrowing from the EU and IMF. The terms of this borrowing are politically unsustainable: sharp public sector budget cuts, higher tax rates on already over-taxed labor, and austerity plans that shrink economies and drive more labor to emigrate.
Bankers in Sweden and Austria, Germany and Britain are about to discover that extending credit to nations that can’t (or won’t) pay may be their problem, not that of their debtors. No one wants to accept the fact that debts that can’t be paid, won’t be…”
http://www.counterpunch.org/hudson04092010.html
~~
The $2.3 Trillion State and Local Government Debt Monster – California Pension Systems on Unsupportable Path with $500 Billion Projected Shortfall. CalPERS, CalSTRS, and UCRS.
http://www.mybudget360.com/calpers-calstrs-ucrs-california-pension-state-local-government-debt-markets/
~~
too many Claims=Fraud.
April 13th, 2010 at 9:02 am
So where is the ‘creditor’ map?
April 13th, 2010 at 11:13 am
@ Roger Mitchell,
although money may be = debt (do not want to debate it now, but Mish had a good take on it), it does not make your argument correct or Maciek’s 3) point incorrect. Government cannot print money / create debt without limit, as it would cause hyperinflation. You also ignore the compounding effect on interest due on old debt, so it is quite relevant. GDP in the denominator is used to make debt comparison across counties roughly on the same scale (and not to indicate how much of debt is payable via GDP)
April 13th, 2010 at 11:58 am
IvoZ,
Money is debt. Period. Not subject to debate. It’s like debating whether the world is round. Unless you can think of a form of money that is not debt, agree to it and move on.
The U.S. government has proved it can print money in vast quantities ($12 trillion so far, including compounded interest), without creating hyper-inflation. In fact, the years in which the government has printed the most money, we have had the lowest inflation. (See: http://rodgermmitchell.wordpress.com/2009/09/09/46/ ) President Carter had modest money creation and high inflation; President Reagan had massive money creation and low inflation.
The government can print money without limit, but I do not say the government should do so. I merely say we are nowhere near the place where hyper-inflation would be a result of money printing. For example:
The federal debt has risen 1,400% in the 30 years since 1980. Back in 1980, if I had asked you what would happen were the debt to rise 1,400%, you probably would have predicted hyper-inflation. Right? You would have been wrong. We actually are fighting deflation. So now, I’ll ask again. What will happen if the debt increases 1,400% in the next 30 years? Another wrong guess about hyper-inflation?
Making debt/GDP comparisons across countries tells nothing. There is a nice 2008 chart at http://en.wikipedia.org/wiki/List_of_countries_by_public_debt. You’ll see scant relationship between debt/GDP and the strength of a country’s economy . (There isn’t even much agreement on what each country’s debt/GDP is.)
The debt/GDP ratio commonly is put forth as a measure of a nation’s ability to pay its debts. Totally wrong. It has nothing to do with a nation’s ability to pay its debts. A nation does not pay its bills with Domestic Product. If America’s GDP were zero, the federal government still would have no difficulty paying its bills.
Visualize a brand new country. It has no money. What is the first thing the new government must do? Create and spend money. That sends money into the private sector, which now, using that money, can create GDP. Federal deficit spending did not depend on GDP. In fact, GDP depended on federal deficit spending.
Think about it before you rush to tell me I’m wrong.
Rodger Malcolm Mitchell
April 13th, 2010 at 2:10 pm
@ RodgerMitchell
“1) All money is debt. Every economist knows this. ”
Not so. I am an economist and I do not think all money is debt. For ~ 99% of world’s history no money was debt. Only in the past 1% of history (say, for the last 30-50 years), most of money is debt and some of money is not.
“2) Try to name one form of money that is not debt. ”
Well, I will actually name four: gold, silver, platinum and palladium. Here are their currency codes:
http://www.currencysystem.com/codes/
Money is what is universally accepted as store of value and medium of exchange. Even though platinum and palladium have currency codes, I personally do not consider them money. But gold and (to lesser extent) silver are. And they are not debt – they are noone’s liability.
If someone offered me $100k equivalent of money, my choice would be (in order of preference):
a) Gold
b) EUR, USD, CHF,
c) Silver,
d) GBP, norwegian, danish, swedish krones, CAD, (and likely several other developed country currencies)
e) Palladium, platinum
f) all the other currencies from Afghanistan afghani to Zimbabwean kwacha.
zz) Zimbabwean dollar
And it is not only my choice – most Central Banks use gold as store of value, as part of their FX reserves. Some hold only several % of their reserves in gold, for some (US, Germany, France) it is more than 50%.
3) You claim:
“The massive debts of WWII and of the Reagan era strongly affect today’s debt/GDP ratio(…)”
Please check your facts. During the Reagan era gross debt grew by ~1.9 trillion (from ~0.8 TRN to ~2.7 TRN dollars). That’s ~15% of total US debt. Last year alone the growth of US debt was 1.9 trillion – equivalent of 8 years of Reagan era. If you claim these are not the same dollars, you will be in conflict with your statement that there was no inflation in the past decade or two.
4) You claim:
“but last year’s GDP does not. [affect the debt/GDP ratio]”
Heh, that’s almost funny :) What is in the denominator of debt to GDP ratio? Hint: last year’s GDP. Do you still claim it does not affect the ratio, if it is in the denominator?
Maciek.
April 13th, 2010 at 2:55 pm
Since there are some good thoughts expressed here, let me ask a question. As I understand it, the Debt/GDP ratio is used because of the premise that GDP represents the potential tax base, and thus the ratio expresses the amount of taxing capacity a country is using.
However, it seems to me that in every analysis I’ve seen, nearly all taxes are paid by individuals. Corporate taxes get passed through in product prices (and represent only a small part of tax revenues anyway). Some taxes are paid by foreigners through exports, but that too is a small part of tax revenues. Over the past decade federal gov’t spending has doubled, state spending has skyrocketed, and household incomes have not gone up much. The ability of the taxpayers to pay the taxes is decreasing, so it seems the debt/GDP ratio is not representative of reality. Thoughts?
April 13th, 2010 at 5:47 pm
@ Marc P
Government spending can increase ahead of ability of taxpayers to pay taxes for many years (if not decades). It really depends on 5 factors:
1) Initial level of debt to GDP
2) real GDP growth rate
3) deficit (let’s assume gov’t spending – taxpayer’s taxes)
4) inflation
5) inflection point – when the bondholders panic.
If you start with, say, 30% debt-to-GDP, deficit of 4% of GDP, 2% GDP growth and 2% inflation, you will never reach more than 100% debt-to-GDP ratio. Why? Because GDP will grow by 4% per year and debt will grow by 4% of GDP per year. In that case you get to 50% debt-to-GDP in ~9 years and to 75% debt-to-GDP in ~26 years. That’s a long time. And 75% debt-to-GDP is relatively safe. True, the EU requires debt-to-GDP to be no more than 60% for the countries willing to join the Eurozone, but with even 100% debt-to-GDP and 5% interest rate a country would spend just 5% of its production to service debt – not too bad.
The problem is that citizens get used to good times and they hate it when they have to switch from ever increasing consumption to belt tightening (vide riots in Greece in the past week or two). 4% deficits may not be dangerous, but 10+% is a very different story. With 50% initial debt-to-GDP ratio, 10% of GDP deficit, 2% GDP growth and 2% inflation, you get to 100% debt-to-GDP within 8 years, 200% within 35 years and it gets exponential from then on. Especially if you factor in the fact that your interest payments rise exponentially – because you have more debt and the interest rate increases, as you’re considered a risky country).
Rodger Mitchell has one good point – if you look at a static picture or even over several years, the deficits (and resulting debt) don’t seem to matter. But then, one day, fingers of instability set in and you get from unstable equlibrium to a state of chaos. Whether the crisis hits at ~115% of debt-to-GDP (as in case of Greece) or 200+% of GDP, as, evidently, in case of Japan, depends on many additional factors. One thing is for certain – the higher the debt-to-GDP ratio the higher the risk of default, ceteris paribus.
Maciek.
April 13th, 2010 at 6:13 pm
MaciekKolodziejczyk,
Oh my God. You claim to be an economist and you do not know all money is debt, and you think precious metals are money?
Try to understand, Mr. economist. A “store of value” is not money. Oil is not money. Real estate is not money. Lumber is not money. Lead, tin and diamonds are not money. Gold and silver are not money. I pray you are not teaching students.
Your #3. Who claimed “these are not the same dollars.” The Reagan deficits are part of the debt/GDP ratio. Are you saying they’re not? Inflation went down during the massive Reagan deficits and inflation has gone down during the current deficits. How do you explain that?
Your #4. Last year’s GDP does not affect this year’s GDP ratio. Please try to think.
I never thought I would see a note like yours from someone claiming to be an economist, a claim I seriously doubt.
Rodger Malcolm Mitchell
April 13th, 2010 at 6:26 pm
Stay away from the brown acid man
April 13th, 2010 at 7:03 pm
“…But then, one day, fingers of instability set in and you get from unstable equlibrium to a state of chaos..” … “..One thing is for certain – the higher the debt-to-GDP ratio the higher the risk of default, ceteris paribus.”
–Maciek, above.
Maciek,
sound points.
April 13th, 2010 at 7:36 pm
Marc P
“As I understand it, the Debt/GDP ratio is used because of the premise that GDP represents the potential tax base, and thus the ratio expresses the amount of taxing capacity a country is using.”
Yes, Marc, that may be the premise. But there is one weakness in the premise. The U.S. federal government does not pay its bills with tax money. If federal taxes were zero, the federal government could pay all its bills or even ten times all its bills.
The government pays bills by crediting the bank accounts of vendors. It does this without regard to tax collections. Ever since we went off the gold standard in 1971, the federal government has had the unlimited ability to pay bills of any amount. Think about the past two years. Trillions in spending, and not one check bounced — and no tax increases.
Note this is different from Greece’s situation. They are on a “euro standard,” which prevents them from creating unlimited money. Thus, Greece actually can go bankrupt. The U.S. cannot.
Note also that Greece is in the same position as California, Illinois, Cook County and Chicago. They too are on a standard — a “dollar standard” — and so are unable to create unlimited money. The U.S. went off the gold standard specifically so it could pay bills of any size, any time.
By the way, Maciek said, [...] the higher the debt-to-GDP ratio the higher the risk of default [...].” He is wrong. The U.S. cannot default. It creates money and pays bills at will.
Rodger Malcolm Mitchell
April 13th, 2010 at 9:14 pm
@ RodgerMitchel
1) “A “store of value” is not money.”
Start with Wikipedia:
“The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment.”
2) I don’t know why you enumerate all the commodities. I never claimed that oil or lumber is money. I claimed that gold (and possibly silver) is.
- It is a medium of exchange – as documented by the currency codes.
- It is a store of value – why else would the Central Bankers keep hundreds of billions of dollars of reserves in gold? They all like yellow shine?
3) “The U.S. cannot default.”
It has already defaulted twice – 1933 and 1971, why are you so sure it can’t default another time? The Credit Default Swaps tell us what the risk of US default is. Why is there a market for them if US cannot default?
Maciek.
April 13th, 2010 at 10:17 pm
Maciek,
also, don’t forget the Default in 1965/-68..
see: 1965 – Silver is completely eliminated in all coins save the Kennedy half-dollar, which was reduced to 40 percent silver by President Lyndon Johnson’s authorization. The Coinage Act of 1965 signed by Lyndon Johnson, terminates the original legislation signed by George Washington 173 years earlier (carrying the death penalty) enabling the US Treasury to eliminate the silver content of all currency.
1968 – June 24 – President Johnson issued a proclamation that all Federal Reserve Silver Certificates were merely fiat legal tender and could not really be redeemed in silver.
http://www.kwaves.com/fiat.htm
from
Fiat Money History in the US
April 13th, 2010 at 11:00 pm
MaciekKolodziejczyk,
You’re wearing me out. As you clearly are not the economist you claim to be, I’ll give it one last try to try to teach you something, then go on to people who truly want to learn.
Today, all money is debt. Gold is not money. If gold were money, what sort of money would it be? Is it M1? Or perhaps, M3? Or is it L? Does the U.S. government count the gold in Fort Knox as part of the money supply? Does the U.S. government say that gold is money? Is gold legal tender? The answer to all questions is “No.” Today, gold is merely a commodity, neither more nor less than platinum, palladium, oil and lumber, which also are “stores of value.”
If gold is “a medium of exchange”, why are you, as an American, not allowed to spend or even to own gold unless you are a smelter or a dentist. Some “medium of exchange” that is. All U.S. money is backed by the full faith and credit of the U.S. government. What backs gold?
You repeatedly mention “currency codes,” then say, “Even though platinum and palladium have currency codes, I personally do not consider them money.” Huh?
As for keeping reserves, this does not make gold money. The U.S. also keeps reserves of oil, uranium, several rare earth elements and even cheese. They all are mere commodities, just like gold, with the same financial attributes as gold.
Prior to 1971, it was possible for the U.S. to default, which is exactly why it went off the gold standard. Today, it is not possible for the U.S. to default. It is possible for a country like Greece to default, because it is on a “euro standard,” therefore unable to create money at will.
You are the perfect example of what I have complained on my web site: A person who was educated before 1971, or by a teacher who was educated before 1971, and stopped learning. Considering that the end of the gold standard was the single most important event in modern economic history (It is the dividing line that marks modern economics), it truly is a shame you decided to stop learning before then. You truly do not have a clue about the implications of that event, do you?
And puleese, spare me the Latin “ceteris paribus.” Do you really think that impresses anyone, or is that a phrase you use in daily conversation?
Rodger Malcolm Mitchell
April 14th, 2010 at 7:46 am
1) LATIN. “Do you really think that impresses anyone, or is that a phrase you use in daily conversation?”
No, in daily conversations I usually impress people with “Anno Domini”, “Saggitarius”, “et cetera”. But when someone gets “cancer”, I spare them Latin and won’t even say “tumor” (which is also Latin) and usually use “neoplasm”, which, fortunately, is Greek.
See here:
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=ceteris+paribus
“Ceteris paribus is commonly used as an assumption when conducting a wide variety of economic analyses. (…) Ceteris paribus is an essential feature of the scientific method and economic analysis.”
But I think, being an economist, you know that, and you are just pulling my legs, don’t you?
2. ON GOLD AS MEDIUM OF EXCHANGE see here:
http://www.guardian.co.uk/world/video/2009/feb/11/zimbabwe-gold-panning-starvation-food
3. US GOLD. “If gold is “a medium of exchange”, why are you, as an American, not allowed to spend or even to own gold unless you are a smelter or a dentist. Some “medium of exchange” that is.”
Ahem, sir. You missed one important development. It is now legal to own or trade in gold for everyone in the US. Since January 1, 1975.
http://thomas.loc.gov/cgi-bin/bdquery/z?d093:SN02665:@@@L&summ2=m&|TOM:/bss/d093query.html|
https://online.kitco.com/bullion/completelist.html
And, gold coins (5, 10, 20 and 50$) are a legal tender in the US:
http://www.usmint.gov/consumer/?flash=yes&action=Law31USC5112
If you don’t have such a basic information concerning gold. I see no reason to continue this conversation with you. It ends here.
Best of luck,
Maciek.
April 14th, 2010 at 11:39 am
Wikipedia ha a list comparing the Debt-to-GDP Ratios estimatet by CIA, OECD and IWF
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
They pretty much agree ±10%, except for a few countries, most notable the USA….
April 14th, 2010 at 12:58 pm
Maciek,
You hung yourself with your own information. Gold coins are legal tender, not because they are gold, but because they are U.S. coins.
All U.S. coins are money, but the gold they are made of is not money. Nor was the copper that pennies once were made of. Nor is the nickel that forms about 25% of nickels. The fact that a coin is made of a metal does not make that metal money.
However, if you would like to spend your gold coin, I would be glad to accommodate you. I’ll sell you $50 worth of U.S. postage stamps for the bargain price of one $25 American Eagle coin, which as money is worth exactly $25. How can you resist such a bargain?
All money is debt. Every form of money is a form of debt. The sooner you understand that, the sooner you will understand economics.
Rodger Malcolm Mitchell
April 14th, 2010 at 1:10 pm
By the way, Maciek,
There also are American Eagle Platinum Bullion Coins. Remember platinum, the metal you admitted is not money? All American Eagles are legal tender coins, with their face value imprinted in U.S. dollars.
Legal tender coins also are made from steel and zinc, so according to your hypothesis, steel and zinc, as well as nickel and copper, are money.
All money is debt. That simple statement is the foundation of all modern economics.
Rodger Malcolm Mitchell