First, Krugman argues that debt isn’t a problem.
(adjusts eyeballs back into sockets…)
Second (and woe to us), Krugman argues that more important than fundamentals is “confidence” in the political system.
So what determines confidence? The actual level of debt has some influence – but it’s not as if there’s a red line, where you cross 90 or 100 percent of GDP and kablooie; see the chart above. Instead, it has a lot to do with the perceived responsibility of the political elite.
What this means is that if you’re worried about the US fiscal position, you should not be focused on this year’s deficit, let alone the 0.07% of GDP in unemployment benefits Bunning tried to stop. You should, instead, worry about when investors will lose confidence in a country where one party insists both that raising taxes is anathema and that trying to rein in Medicare spending means creating death panels.
The fundamentals blow donkey dick. Now, the man is arguing for confidence in the political system?
Let’s have a look at that 9 mm, thank you. It fits in my mouth perfectly. Sure, put it on my credit card!