Crisis

In his testimony on Capitol Hill, the economist Russel Roberts is exposing the reasons why the The American Recovery and Reinvestment Act of 2009 (ARRA) has not the anticipated by government effect on jobs creation. He is pointing out that given the lack of success so far and the role uncertainty plays in the decision-making of entrepreneurs, investors and consumers, doing less might, paradoxically, be more successful than doing more, especially if the “more” that is done works in the wrong direction.

Wanna know how much is the US Government spending right now? Or how fast US debt growths? You should add US.Debt.Clock.org on your favourite websites.

The Fitch rating agency on Tuesday downgraded Greece’s long-term debt ratings as well as those on four of the country’s largest banks, describing prospects for Greek public finances as negative. Greece is now exposed to the risk of losing the small amount of credibility it still has in front of its creditors. The concerns are growing about its ability to pay its huge public debt, estimated to 110% of GDP and budget deficit above 12.7% of GDP. A look at the evolution of the external debt of Greece is illustrating the concern of credit rating agencies and international financial markets:

While the world is moved deeply by the Copenhagen climate summit, several voices are disturbing the surrounding enthusiasm. The so-called climate skeptics have seen their cause promoted by the recent Climategate affair, which revealed that eminent climate scientists subverted the results of their research, and some other key data for the global warming theory seem to have been fiddled.

This study is realized by Ludger Schuknecht, economist at the European Central Bank. He is making the case for the return to healthy and sustainable public finances. In that perspective, the authors identifies four central issues.

First, deficits and debts must be returned to a sustainable path. In many countries, deficits will need to fall by one percentage point of GDP per year and in some by much more. Even then, a balanced budget would only be reached in about 2015 for the average of the euro area and even later in the U.K.

Public Spending and Growth by Patrick Minford and Jiang Wang

L’endettement de l’Etat: stratégie de croissance ou myopie insouciante ? – Pierre Garello, Vesselina Spassova (french and english versions available)

A new historical database on debt and banking crisis is showing that we might be in a trivial, rather than exceptional economic situation regarding government debt. Kenneth Rogoff and Carmen Reinhart, the authors of the database and the connected study are showing that over the longer sweep of history governments regularly resorted to defaulting or at least restructuring their “uncomfortable” government debt. After the Great Depression, over 40% of the countries did so, and after the 1980-82 recession, 30% of the countries did it.