Some sense on ZOMG!!! Teh deficit!!!!
Consider some statistical facts. Interest rates are lower today than at any time in history, meaning that governments find it easier to borrow money than ever before. This hardly suggests impending bankruptcy.
Especially since the investors falling all over themselves to lend them money are not naïve widows and orphans or government-controlled central banks. Rather, hedge funds, billionaires and the sovereign-wealth funds of financially sophisticated nations like Norway and Singapore have all poured far more money into government bonds than into shares, property or gold over the past three years.
Why are sophisticated investors unmoved by the deficit panic? Because they know that governments, at least outside the euro zone, are nowhere near bankruptcy. In fact, debt levels are not dangerously high. The U.S. government net debt is expected to stabilize at 89 percent of gross domestic product from 2014 to 2017, according to the International Monetary Fund, even if all the Bush tax cuts were extended and without any of the spending cuts assumed in the fiscal cliff. Similar stable debt levels are projected for Germany, France, Italy, Britain and even Spain. Assuming debt levels do stabilize in the rage of 85 percent to 100 percent of GDP, these won’t be worryingly high. U.S. national debt peaked at 110 percent of GDP in the late 1940s, and Britain’s was even higher. But nobody worried much about national bankruptcy after World War II – and the confidence proved justified. For the U.S. and Britain both enjoyed their strongest economic performance in the two decades after their deficits peaked at more than 100 percent of GDP.
The U.S. and British fiscal situations today are even less troubling — partly because two-thirds of the government debt issued since the 2008 crisis has been bought by the central banks. Since the Federal Reserve and the Bank of England are part of their respective governments, the bonds they own represent debts the government owes to itself.