Erskine Bowles on Predictable Economic Crises

Tennessee Senator Bob Corker had an oped in the Washington Post complaining about the budget deficit. He concluded the piece by quoting Morgan Stanley director Erskine Bowles comment that the deficit is leading to "the most predictable economic crisis in history."

This is not true. There are many countries that have sustained debt to GDP levels of more than twice projected for the United States ten years from now. Japan currently has a debt to GDP ratio of more than 200 percent and can still borrow long-term in financial markets at interest rates close to 1 percent. Financial markets show no concern whatsoever about the financial situation of the United States, with the yield on the 30-year Treasury bond just over 3 percent.

In fact, the most predictable economic crisis in history was the crisis that would result from the collapse of the $8 trillion housing bubble. This led to both the current downturn and the large deficits that Senator Corker and Mr. Bowles find so upsetting. Of course both of them failed to see that crisis coming.

"the most predictable economic crisis in history"
written by Paul, March 07, 2012 8:32

Would be the economic depression that would result if the U.S. cut spending in a futile attempt to balance the budget (deja vu 1937).

But for the Republicans and their mouthpiece, the WaPo, it is all Greek to them.

deficit hawks either ignorant or just full of it
written by Joe Emersberger, March 07, 2012 10:11

An easy way to see that deficit hawks either don’t know what they are talking about –or are simply con artists – is that they never bring up the examples of Norway, Sweden and Denmark.

These countries have ZERO net debt despite their extensive welfare states. In fact Sweden and Norway both have net WEALTH rather than net debt (i.e. NEGATIVE net debt to GDP ratios).

http://www.economywatch.com/economic-statistics/economic-indicators/General_Government_Net_Debt_Percentage_GDP/

Norway’s = -156% of GDP
Denmark’s is 0.9% of GDP
Sweden’s is -14.6% of GDP

BTW neither Sweden nor Denmark have significant oil exports like Norway.

Proven
written by james, March 07, 2012 10:12

What proven work so well to get money from big contribution from equity funds mgrs, Wall Street bankers, lobbyists and connect your message with the mass media and average people is this: promote the message from the 1% in a simple and very-easy connect way with the public which is out-of-control spending will bring dire consequence.

Do you think average people care or know the nuance like accurate measurement is % of GDP and look at other similar countries with such high ratio? No.

That kind of nuance is what got Gore in trouble connecting his message with ordinary people. No mass media willing to explain that as well.

these are easy to understand alternatives
written by Joe Emersberger, March 07, 2012 11:39

yes "average" people care about alternatives to slashing social spending as a way to reduce debt. That is why easy to find real world alternatives are ignored by the corproate press. There is nothing diffult to understand in what I posted above - and Gore, Clinton Obama and the Democrats are as much servants of the 1% as the Republicans.

Erskine Bowles on Predictable Economic Crises

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