USA's declining debt - thanks to the Nordic Model

[Blart]

http://www.economist.com/blogs/freee...1/deleveraging

Total debt in the USA is declining - and for one reason: we're (accidentally) following the Nordic Model.

What you see here is a gradual decline in overall debt — not at all what you hear in the public debate. Now, the composition of that debt is changing: rising public debt, falling private debt. But that’s exactly what you need to deal with the aftermath of a Minsky moment: you need to reduce the debt of balance-sheet-constrained players, so that the drag on the economy is reduced over time, eventually getting us to the point where deficit spending is no longer needed to sustain the economy.

Now let's compare our recovery to Europe, where they're using Austerity measures that make the Tea Party drool:

America's falling debt has a lot to do with the wave of household defaults it's suffered since the crisis occurred. But it also mirrors past, successful Nordic deleveraging in that the public sector has so far delayed significant fiscal tightening until the private sector was well on in the process of reducing its debt load. Europe, by contrast, has used regulatory forbearance to delay household defaults and has attempted to undergo rapid deleveraging across the public and private sectors. The resulting recession has made the process of debt reduction very difficult. Neither has Europe done anything like the structural reform that characterised Scandinavian adjustments in the past, nor can it count on depreciation and expanded trade associated with floating currencies.

American progress doesn't free it of the need to rein in government debt growth at some point. For now, however, its policy choices—however accidental—have served it well.

http://www.economist.com/blogs/freee...1/deleveraging

(and just a quick TOLD YOU SO: I believe I've preached the Nordic Model on these forums before )

[mosca]

Your first graph is somewhat hard to follow - so the debt portrayed (am I right in assuming that's private debt?) went from $255 billion to $ 249 billion? AWESOME

[Blart]

It's showing that the decline in private debt is outpacing the increase in public debt.

Every category of private debt—financial, corporate and household—has fallen as a share of GDP since 2008. The financial sector’s debt is now at its 2000 level.

Having a private sector under a mountain of debt is a strain on the economy, so the nordic model runs a public deficit until the private sector can stand on its own again.

Compare that to Europe, where they're tightening their belts, trying to reduce all debt at the same time. It's having the opposite effect.

[DomCasual]

Tiger Woods approves of the Nordic Model!

[Tombstone RJ]

Originally Posted by DomCasual

Tiger Woods approves of the Nordic Model!

this is very hard to say no to. Oh the irony for blart...

[Blart]

Hahaha

[BroncoLifer]

Originally Posted by DomCasual

Tiger Woods approves of the Nordic Model!

Yes, but the Nordic Model no longer approves of Tiger Woods....

[pricejj]

Could you post a graph showing the increase in 'interest payment on federal debt' vs. 'tax revenues'?

What your also telling me, is that no matter how much we, the taxpayer, have to pay in interest, it doesn't matter as long as the federal government spends more and more money (increasing GDP)?

You didn't do very well in math did you (specifically the part about exponents)?

[DomCasual]

Originally Posted by BroncoLifer

Yes, but the Nordic Model no longer approves of Tiger Woods....

I know. And for that, he is an idiot.

[pricejj]

The real question is: How is the Obama administration going to hide the fact that they will have added $5.3T to the federal debt in four years, which adds up to ~$200B in yearly interest payments, from now until you figure out a way to pay it off.

Guess you can throw "free" healthcare out the window huh?

[Rohirrim]

Originally Posted by DomCasual

Tiger Woods approves of the Nordic Model!

He was leaving that at home so he could go hang out with porno skanks? What a fool.

[W*GS]

Originally Posted by Rohirrim

He was leaving that at home so he could go hang out with porno skanks? What a fool.

No kidding. Just like whats-is-name cheating on Halle Berry. WTF?!?

[BroncoLifer]

Originally Posted by W*GS

No kidding. Just like whats-is-name cheating on Halle Berry. WTF?!?

Or Hugh Grant scoring a nasty Hollywood hooker when Elizabeth Hurley was his.

[Missouribronc]

Am I reading that right? During the 2008 election and just after Obama took over private debt went up by $25 billion, and now we're celebrating because it went down $4 billion in the last three years?

[Blart]

Originally Posted by Missouribronc

Am I reading that right? During the 2008 election and just after Obama took over private debt went up by $25 billion, and now we're celebrating because it went down $4 billion in the last three years?

The chart shows total debt (which rose during the crash) not just private.


What's sad is that the recovery could be going much, much faster by further easing private debt.

[orinjkrush]

Originally Posted by W*GS

No kidding. Just like whats-is-name cheating on Halle Berry. WTF?!?

behind every beautiful woman, there is a guy who is tired/bored of banging her.

step up and put your name in the hat.