tag:blogger.com,1999:blog-582368152716771238.post134913887670644408..comments2024-03-29T07:18:14.271-05:00Comments on The Grumpy Economist: Rogoff on UK DefaultsJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-582368152716771238.post-15894525077943208242013-10-08T16:12:02.977-05:002013-10-08T16:12:02.977-05:00"UK’s finance minister at the height of the c..."UK’s finance minister at the height of the crisis, created £60bn out of thin air for the benefit of two insolvent banks RBS and HBOS."<br /><br />Of course there was no inflation. If a bank is insolvent they are not going to turn around and lend out that newly created money.<br /><br /><br />Instinctively we all know that printing money ad finitim is not going to solve problems past the next crisis. That which is not sustainable will not be sustained. Sure baby boomers like yourself are happy to take on debt and print money and leave the problems to the younger generations to deal with. That's the disgusting selfishness of your generation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-65499443430878045172013-10-05T07:06:13.867-05:002013-10-05T07:06:13.867-05:00The spread on credit default swaps on US sovereign...The spread on credit default swaps on US sovereigns has drifted up about 12 basis points in the past month, from about 22 to about 34. That market is not open to individual investors, however. Douglas Levenenoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-80794866378749540252013-10-04T15:06:03.682-05:002013-10-04T15:06:03.682-05:00There are inverse ETFs on Treasury Bonds, and just...There are inverse ETFs on Treasury Bonds, and just one of then, TBT,trades about 3m a day, so yes, I think you would conclude there is active shorting.jon liveseynoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-41980438043328768492013-10-04T14:41:40.006-05:002013-10-04T14:41:40.006-05:00Re Rogoff’s reference to “huge sovereign debts”, U...Re Rogoff’s reference to “huge sovereign debts”, UK and US debt is not yet up to half the level it was at just after WWII. <br /><br />As to “pension liabilities”, that has NOTHING TO DO with the debt issue. Most of the UK’s pensions (particularly the state pension) is “pay as you go”. I.e. pensions in 2013 are paid for by taxpayers and other pension fund contributors in 2013.<br /><br />“a country needs to be substantially below its ultimate borrowing limit, or it loses its ability to fight crises going ahead.” Not true. If no one wants to lend to a country, and the country needs stimulus, it can just print money. That won’t be inflationary as long as there’s spare capacity. Alistair Darling, the UK’s finance minister at the height of the crisis, created £60bn out of thin air for the benefit of two insolvent banks RBS and HBOS. Inflation didn’t skyrocket.<br /><br />John Cochrane cites Greece as an example of a country that has reached it’s borrowing limit (in his comment above). Greece is a completely different kettle of fish to a country like the US, UK, Japan, etc which issue their own currencies.<br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-70553800953508686582013-10-04T11:33:55.410-05:002013-10-04T11:33:55.410-05:00There are some extra negatives, but yes, sometimes...There are some extra negatives, but yes, sometimes I hold back and leave wrong comments as problem set exercises. <br /><br />Greece, for example, ran out of borrowing authority to fight its recession after the financial crisis and recession. (Leave aside whether that helps, Greece certainly wanted to borrow more.)<br /><br />If the states go under or the eurozone explodes, or (let's hope not) the US fights another war, we're going to have to start borrowing an extra trillion or so per year. <br />There is a limit somewhere.<br /> <br />Please, chime in with your own examples. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-77263539002399543052013-10-04T11:27:31.561-05:002013-10-04T11:27:31.561-05:00Since the statement referers to "a country&qu...Since the statement referers to "a country", for the statement to be wrong "at all levels", I would think all Mr. Cochrane needs to do is find one example where a sovereign's constrained borrowing capacity has not limited its ability to fight a crisis to refute the objection. (I think he could cite at least 50 episodes, and if not I will help him.)<br /><br />If you interpreted the statement as "any and every country", I think the article did suggest that Japan and the US have a lot but not unlimited leeway.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-7968327148188352592013-10-04T08:11:55.975-05:002013-10-04T08:11:55.975-05:00Just out of curiosity: Is there anyone shorting US...Just out of curiosity: Is there anyone shorting US bonds, thinking about the medium run (1-5 years)?Thiagonoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-59439729672337323942013-10-04T06:38:22.127-05:002013-10-04T06:38:22.127-05:00"Looking forward, an important point: a count..."Looking forward, an important point: a country needs to be substantially below its ultimate borrowing limit, or it loses its ability to fight crises going ahead."<br /><br />Ugh... Wrong on so many levels. There are plenty of good reasons a government should limit its borrowing. Threat of bankruptcy or insolvency is not a good one. A "lost" ability to fight "crises" going forward is not a a good one either.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.com