Debt Sustainability ……. A Most Idiotic Notion!!!!

Debt Sustainability

So, I’ve heard this term lately, and today was the last time before I felt I had to write about it.

Today, I’ve read this ….

Obama speaks to Greek PM about debt crisis

For his part, the president “reiterated that it is in everyone’s interest that Greece and its creditors reach a mutually-acceptable agreement,” the statement said.

As for the call with Merkel, the White House said she and Obama cited the need for “a durable agreement that will allow Greece to resume reforms, return to growth, and achieve debt sustainability within the Eurozone.

It’s the most asinine phrase.  It connotes an acceptable level of perpetual debt.  This can never be a goal, or rather, should never be a goal.  It will always be doomed to failure. It is, in essence, socialism.  I suppose there is a notion in the theoretical world where a socialist state can exist without debt.  It doesn’t in reality, because the thoughts and notions to do what is perceived as “good” always exceed the practical limitations of the ability to do “good”. 

A sustained public debt is simply a continuous burden on the people.  No one other than a maniacal tyrant would believe a continuous burden on the people is a laudable goal. 

That isn’t to say there isn’t a temporary acceptable level of debt.   Nearly all of us have determined one at some point in our lives.  But, the goal isn’t to keep the debt, the goal is to, as quickly as possible, eliminate the debt. 

Why?

Because credit is a limited thing.  The more debt you have, the less credit you have remaining.  This is true for individuals, and, as Greece exemplifies, it is true for nations, as well.  For individuals, the credit limit one has is easy to determine.  For nations, it’s a bit more difficult to determine the exact amount.  Indeed, it’s never known for nations until the creditors say they can’t or won’t go any further. 

This is exactly true for Greece!  It may very well be that they have already achieve “sustainable debt”!  All the Troika has to do is to agree to perpetually bail Greece out!  In that case, Greece’ debt is sustainable up to the point that the Troika’s debt isn’t sustainable …… but, that would never happen, right?

If and when a nation decides it has an acceptable or “sustainable” level of debt, it loses a buffer it has in times of real need. 

For instance, the US debt currently stands at $18 trillion and some change.  Some imbeciles believe this is a “sustainable debt”.  And, for now, it is.  But, what happens when the interest demanded increases?  What happens if a sudden real emergency of global proportions occurs? 

BTW, the Fed will raise interest rates soon.  This doesn’t directly effect the interest the US must pay on her debts, but, it is in direct relation.  The higher the fed rate the higher the interest on loans and savings.  The higher the interest on returns … either in saving or loaning the higher the interest expected on bonds.  If I can make 5% on CDs, then why would I buy a bond at 2%?  I wouldn’t. 

There’s no such thing as “debt sustainability ”.  Debt is simply increasing the risk of insolvability.  The more debt, the more the risk.  Less debt increases credit available.  This is true for individuals, businesses, and nations.