Posted by WARREN MOSLER on December 21st, 2011
By John Carney
Dec 21 (CNBC) — I realize that Republicans want the United States to accumulate less debt. That’s a fine policy position to take. I’m somewhat sympathetic to the idea that debt can drag down the economy.
But there’s no need to start saying crazy things like the U.S. is about to become Italy or Greece if Obama is elected for another term. This simply isn’t in the cards.
The problems faced by Greece and Italy are nowhere near comparable to those faced by the United States. We have far more dynamic economies — and far lower tax rates — than those countries. More important, our government can indirectly self-finance by having the Federal Reserve buy Treasurys on the secondary market.
As we’ve seen, the Fed has an unlimited balance sheet, something that Greece and Italy do not enjoy.
Our government will never run out of money. Greece and Italy can definitely run out of money.
So it’s a shame to see Mitt Romney, the Republican frontrunner for president, spouting this nonsense.
From The Hill:
Mitt Romney said that the United States would experience a financial crisis similar to that of Greece or Italy if President Obama were elected to a second term, and hit rival Newt Gingrich’s plan for the federal judiciary as unconstitutional during an interview Monday night with Fox News’s Bill O’Reilly.
“I think we hit a Greece-like wall. I think before the end of his second term, if he were re-elected, there’s a very high risk that we would hit a financial crisis that Greece or Italy have faced,” Romney said.
This is worse than ignorant. It is actually malfeasant. Having one of the leading politicians in the country talk like this can only induce further economic panic.
(Hat tip: Warren Mosler)