On 03/26/2015 10:05 AM, Ed Huntress wrote:
On Thu, 26 Mar 2015 09:23:52 -0500, wrote:

On 03/26/2015 7:32 AM, Ed Huntress wrote:
...

To give you an idea of how much all of this upends common sense, note
that Luxembourg, a tiny country with a very successful economy, has a
per-capita external, national debt that is THIRTY-FOUR TIMES that of
the United states. How do they manage that? By holding comparably
large amounts of the debt of OTHER countries.

...

To show how it _does_ make sense, on a per GDP basis, Luxemborug ranks
down at 50+ on the above list where the PIGS are almost consonant to the
top tier.

Which "above list" are we talking about here?

The previously quoted list of the top national debt percentages relative
to GDP wherein the PIGS almost make the top of the list exclusively.

They (Loux) have plenty of national economic engine comparatively to be
able to service what they've got and hence they _can_ refinance it
because the markets aren't concerned they will default.
....

Is this a total explanation? Of course not; it is, as you say an
extremely complicated system. OTOH, that these particular countries
have a specific common characteristic isn't chance; it's indicative of
endemic problems in their basic economies/social structures.

Well, yeah. I thought that our disagreement here, though, was, first,
over government employment:.


No, not really, I didn't/don't refute that purely numbers aren't
particularly tell, no...I just did agree that the size of government
spending _is_ a problem in these governments with real issues, of which
Greece is simply on example...

The two data points are connected - Greece has far more government than
is healthy or affordable.

This, as we saw from actual figures, is hardly the cause of Greece's
problems, and Greece's percentage of government employees is not
especially high.

Regarding government debt, there are several ways to measure it, but
the *amount* of debt, relative to GDP or per-capita, has only a slim
relationship to a country's growth or per-capita income.

What does have a lot to do with it is the culture of a country and the
management capability of its government. That that "management
capability," in this sense, is measured in "Washington consensus"
economic terms.

Apart from that, the rest of the debt issue is, as I said, not
something that I think we can resolve here in any way. The
interactions in large economies are enormously complex and they don't
succumb to any simplistic interpretation.

What I disagree with in the above is that debt on a per GDP basis _IS_
significant as it measures the magnitude of the problem on a scale that
is a measure of the amount of economic activity there is as potential
with which to service said debt.

It is, as stated, apparent it is a good indicator of trouble when your
example on a per capita basis puts a company in very bad light that you
(and I agree) isn't in particular trouble whereas on the per GDP basis
it's clear wny they can handle it.

Now, that they're there on that second scale is a result of much of what
you go on to account for in the subsequent paragraph which essentially
rephrases what I had said just above.

The point I was making is that while the previous poster's one claim of
employment isn't alone the actual root cause I think he's correct in
there being a "government is the cause" underlying problem in all those
countries; it's the collective inability to control what their deficit
financing is in terms of what their ability to pay is.

I can run $X/mo on my AmEx and be able to pay it of routinely and can
push that up to quit a bit more for a short term and still be ok. I
can't put it to $5X or so times what routinely do indefinitely and not
have serious problems down the road. Greece has been at equivalent of
the latter on steroids for 100 yr and keeps on repeating the same
pattern over and over and over...

As for "simplistic interpertation", we're not trying to build a model,
we're looking for a measure by which to gauge whether "Houston, there's
a problem!" or not and it's pretty clear to me that using the debt/GDP
ratio is a strong indicator of "issues" either now or in the short term
unless either the numerator is lowered or the denominator raised. The
statistic isn't the cause, it is, after all simply a statistic. But,
it's pretty highly correlated with countries with serious problems.

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