Why is it that politicians and economists bang on about debt continuously, if you look at one country it’s the end of the world, at another it’s almost an irrelevance. Is debt so important and the level of debt as critical as politicians put forward?or is this more to do with their personal agenda?
Most countries are hovering around the 100% of GDP, but the cost of servicing the debt is dramatically different. If this was the only criteria for forcing countries into austerity measures, then Japan would be at the fore-front of economic down turn. Why then all of these problems for the P.I.G.S.? well no one has to trade with them, they are all tourism and agricultural based economies, discretionary products, you do not have to buy them. But Japan, which has exported its metal bashing industries, has kept all the production of high-tech, high value items inside their internal economy.
If you are in the automotive, defence or aircraft production industry, you need Japanese technology and components. You have to trade with Japan, it is high-tech production that keeps certain economies prosperous, not debt worries. Japan with national debt at 228% of GDP is way off the scale but it only costs them 1.7% to service.
If the P.I.G., countries wish to advance they have to change the structure of their economies not worry endlessly about debt, they have to trade, then the market will solve the payments problem.
In the UK, a politicians economic obsession with reducing debt looks like causing a double dip recession while the rest of the world is enjoying economic growth of 5 plus %. If you slam the brakes on too hard all you do is stop. In 1967 a balance of payments crisis caused the pound to be devalued. £800m pounds, to put it into todays values, that is how much Britain spent on printer ink last year, so values change. The cost of bailing out the financial institutions was £1600bn, 100% of GDP but at least there are assets which can be recouped when the balance sheets of these banks are fully restored, so perhaps our debt isn’t so bad, perhaps it’s time to look at a different economic model George.