Econintersect: Astounding news on the front cover of Barron’s this week. The investment, business and financial weekly published by Dow Jones has a full color photo of President Obama with a headline that can have no other logical interpretation than that given in our headline above.
The text below the picture is the lede for the story inside:
If we follow President Obama’s plan, the U.S. in 25 years will be in worse shape than Greece is today. The only way to avoid it: Make serious spending cuts now or load crippling taxes on both the rich and the middle class. Why accepting automatic spending cuts on March 1 may be the only responsible course.
Inside the issue we found some confusion.
- First, the article refers to numbers in 22 years (2035), not the 25 on the cover.
- Next the basis of the estimates quoted is the CBO (Congressional Budget Office. This is the same operation that forecast budget surpluses forever just 12 years ago. And it also has just downsized the estimate for the deficit in 2013. What credibility can any estimate from the CBO have for 5 or 10 years in future, to say nothing of 22.
Econintersect has looked for comments from others:
- Joe Weisenthal at Business Insider says its all about selling the publication to older, conservative readers who find the doom story appealing.
- Dan Gainor at CBSNews.com said that Barron’s wasn’t the first to make the Greece comparison and mentioned Rick Santelli of CNBC as another authority who has thought the same since 2010.
- Back in January Rep Darrell Issa (R, CA) made the same comparison of U.S. in the future to Greece in the present, talking with Greta Susteren on Fox News.
- Mark Mason on PressTV says the Obama economic policies are driving the U.S. towards disaster and the country will end up like Greece.
- John Miller and Katherine Sciacchitano at AlterNet have posted a rebuttal to the Barron’s article. Unfortunately they misstate several facts about central bank operations which damages the quality of their analysis. One point they make that is interesting is that austerity is what is destroying Greece and they believe the U.S. will not make that mistake. But that is what the Greece comparison to the U.S. in Barron’s is saying will have to happen as a policy decision. So again the rebuttal flounders a little.
- Paul Krugman doesn’t enter the debate really at all. His reaction was dismissive:
I think of it as a form of affinity fraud, in which these publications (and various web sites too) reach out to readers by appealing to their shared hatred of snooty intellectuals who probably want to take all their money and give it to the 47 percent; since such people also tend to favor monetary and fiscal flexibility, there you have it.
That is all more than an hour of doing internet searches came up with almost three full days after the Barron’s article hit the street.
Those that take Barron’s seriously haven’t seen it necessary to say anything further and those who think Barron’s has it wrong are either making bad arguments or dismissing the significance of what was published.
Those who read this who have knowledge of other material written about the Barron’s piece, please send us the link(s).
Note: The remainder of this article has considerable editorial opinion.
No one has questioned the the assumptions which continue to be made that the political choices now in vogue will not be changed. These include such options using the constitutional authority of the Treasury to produce debt-free money. These include the option of continuing QE operations which can have as one possible outcome an endgame with production of new money that is not borrowed from the banks.
And, to get to the bottom line, in order for the U.S. to get to a condition equivalent to Greece it must owe debt in some other than its own currency. Greece has no monetary flexibility because it does not issue its own currency – its currency is the euro. Greece cannot issue itself a single euro. It cannot make monetary changes to devalue the euro. It does not have a floating currency that adjusts to any imbalances the country has.
In other words, for the U.S. to become like Greece it will have to stop using the dollar and start using a currency over which it is not monetarily sovereign.
That is the reason for the headline on this article. For the Barron’s story to have relevancy the U.S. will have to abandon the dollar and start using the euro, or the amero, or the Chinese yuan, or the Japanese yen. Heck, we could even forget about the American Revolution and start using the pound sterling. This is a logical inference from the Barron’s article. Otherwise the U.S. can’t get in the fix that Greece is in.
To conclude, a final thought. Perhaps the world is looking at this from the viewpoint that doing careful analysis on how the current fiscal situation looks projected 22 (or 25) years into the future is just not a productive effort at a time when there are contractionary forces rampant throughout a number of global economies.
Sources: Linked within the article.
