正文
We\'re witnessing a debt explosion now, from personal debt to sovereign debt. Greece now is struggling hard to find the way out. Euro just hit a 4 yr low, and Copper saw its biggest one day move ever …..
Is there any way out of a debt crisis? If yes, what are the ways out of a debt crisis?
Niall Ferguson pointed out there were basically 6 ways out in his seminar:
1. Earn more money; A higher growth rate of GDP
2. A lower interest rate on the public debt
3. A bailout, meaning either a current transfer payment or a capital transfer from abroad
4. Fiscal pain, meaning an increase in taxes and/or a cut in public spending
5. Increased recourse to seigniorage(revenues from monetary issuance) by the central bank
6. Default, including every form of non-compliance with the original terms of the debt contract, including repudiation, standstill, moratorium, restructuring, rescheduling of interest or principal repayment etc.
For individual person, we can only have (1), (3),(4),(6) 4 ways out.
China, is a typical example to overcome debt problem by riding the high growth rate of GDP.
Japan is still surviving by using method (2). Interest is the most crucial part of the crisis. Averagely, all developed countries pay more than 22% of their GDP for the interest of their debts alone.
Greece has to use methods (3) and (4), or otherwise (6)
What the United States can do are (4),(5) and (6), Cut, Print and Default. The US has an unique weapon: method (5) because only a nation with monetary sovereignty and also with their own currency debt can deploy method (5).
From history data, we know, after World War II, the US suffered 53% inflation rate to reduce debt of 90% GDP; while United Kingdom suffered 228% inflations to reduce their debt worth 212% of it GDP.
Now with over 100% GDP debt, what\'s the future for the US?
In Niall Ferguson’s eyes, for the United States, it’s quite a short ride from here …
… to here
Is there any way out of a debt crisis? If yes, what are the ways out of a debt crisis?
Niall Ferguson pointed out there were basically 6 ways out in his seminar:
1. Earn more money; A higher growth rate of GDP
2. A lower interest rate on the public debt
3. A bailout, meaning either a current transfer payment or a capital transfer from abroad
4. Fiscal pain, meaning an increase in taxes and/or a cut in public spending
5. Increased recourse to seigniorage(revenues from monetary issuance) by the central bank
6. Default, including every form of non-compliance with the original terms of the debt contract, including repudiation, standstill, moratorium, restructuring, rescheduling of interest or principal repayment etc.
For individual person, we can only have (1), (3),(4),(6) 4 ways out.
China, is a typical example to overcome debt problem by riding the high growth rate of GDP.
Japan is still surviving by using method (2). Interest is the most crucial part of the crisis. Averagely, all developed countries pay more than 22% of their GDP for the interest of their debts alone.
Greece has to use methods (3) and (4), or otherwise (6)
What the United States can do are (4),(5) and (6), Cut, Print and Default. The US has an unique weapon: method (5) because only a nation with monetary sovereignty and also with their own currency debt can deploy method (5).
From history data, we know, after World War II, the US suffered 53% inflation rate to reduce debt of 90% GDP; while United Kingdom suffered 228% inflations to reduce their debt worth 212% of it GDP.
Now with over 100% GDP debt, what\'s the future for the US?
In Niall Ferguson’s eyes, for the United States, it’s quite a short ride from here …
… to here
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