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Comparing the Europe and US debt crises

The Economist has an insightful commentary on both debt crises. Excerpt below.

Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem,” Mr Rachman writes. I have some quibbles about the way he frames the economic issues as a generalised problem of “an unsustainable and dangerous boom in credit”, viz homeowner credit in America and the overdrawn borrowing of Greece and Italy in Europe. This seems to smooth over a lot of differences a bit too easily; the American housing bubble was fueled by CDOs, but the economic problems in Europe aren’t about an asset bubble caused by Greek or Italian government borrowing, and to the extent that the problems are due not to asset bubbles but to financial interconnectedness, the interconnectedness caused by private-sector issuance of CDOs and CDSs isn’t really the same as the interconnectedness caused by the adoption of the euro across 17 countries.

  1. Joji Y.
    August 18th, 2011 at 21:00 | #1

    How to solve following 3 issues with just one action:

    1-USA, EU and Japan’s debts.
    2-Eliminate poverty in Undeveloped Nations.
    3-Bring New Economy Boom Worldwide.

    Simply ask USA to increase their Debt to at least 50% of their National Reserve.
    Then USA should call International Minister of Finance meeting and demand all the Nations to issue 50% more of their currency. Without affecting exchange rates.

    By doing above, USA , Eu and Japan no longer have debt, poor nations government got 50% more money, which can spend to elevate standard of living for all hteir citizens and got money to by foreign good from G8 nations (which over produces Edible Goods and Durable Goods which are ended up in the garbage) that will brings Economic Boom Worldwide.

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