Skip to content

Public vs. Private Debt

August 16, 2012

Although this chart raises questions about of why is it that Japan and the UK are not yet failed states (too much public and private debt) and shows that the US debt situation is relatively benign, it sends an additional message. What this chart seems to indicate is that, in most cases we do not have a “public” debt crisis but we do have a “private” debt crisis (e.g., Spain).

It is interesting to note that in Greece where it is arguable that the government spent too much money (not on so-called costly social programs but on economic development [infrastructure] programs) the German bankers demanded governmental austerity requiring slashing social programs, that were not responsible for much of the debt on the first place, in order to pay off mostly German bond holders. In Spain’s case where the problem is clearly not “public” expenditure but failures of the private banking system, caused in part by governmental negligence in adequately regulating them, the German bankers recently shoveled money to Spain to disburse to the private banks with no requirements that the banks clean up their act or that the government increase their oversight.
Why is it that Bankers believe that the discipline of the private market wherein private entities that bet wrong fail, applies only to the rest of us and not to them?

Advertisements
Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: