Italy vs. Japan
Via Marginal Revolution, Paul Krugman wonders why there is such a disparity in the interest rates Italy has to pay on its bonds vs. Japan. Commenters seem unable to come up with anything plausible. Some mention cultural differences, but only one commenter at either blog mentioned trade policy.
Japan's current account stood at 3.6% of GDP as of December, 2010 and has averaged 2.6% of GDP since 1980. Italy's current account, on the other hand, was -3.3% of GDP in December and has averaged -0.88% since 1980. So Japan, unlike Italy, can actually pay its debt since it sells more to the rest of the world than it purchases.
The U.S. is more like Italy - we buy more than we sell. But we have the dollar, and all our debts are denominated in dollars, so no problem there. And of course we have all those aircraft carriers, in case we're really desperate.
Japan's current account stood at 3.6% of GDP as of December, 2010 and has averaged 2.6% of GDP since 1980. Italy's current account, on the other hand, was -3.3% of GDP in December and has averaged -0.88% since 1980. So Japan, unlike Italy, can actually pay its debt since it sells more to the rest of the world than it purchases.
The U.S. is more like Italy - we buy more than we sell. But we have the dollar, and all our debts are denominated in dollars, so no problem there. And of course we have all those aircraft carriers, in case we're really desperate.
posted by ziel | 7/18/2011 10:22:00 PM
6 Comments:
Trident missiles, really - aircraft carriers are old hat.
True - they'll soon be sitting ducks out there on the high seas.
Aircraft carriers old hat? You must be insane...
Did you see that link in the comment above?
Carriers have been vulnerable enough to be useless in any central war for a long time - decades. Nuclear weapons, you know.
The dude is absolutely right, and there is no question.
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