Your Lying Eyes

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18 July 2011

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.


Blogger gcochran said...

Trident missiles, really - aircraft carriers are old hat.

July 19, 2011 2:06 PM  
Blogger ziel said...

True - they'll soon be sitting ducks out there on the high seas.

July 19, 2011 6:24 PM  
Anonymous Anonymous said...

Aircraft carriers old hat? You must be insane...

July 20, 2011 11:16 PM  
Blogger ziel said...

Did you see that link in the comment above?

July 21, 2011 8:04 AM  
Blogger gcochran said...

Carriers have been vulnerable enough to be useless in any central war for a long time - decades. Nuclear weapons, you know.

July 22, 2011 2:07 PM  
Anonymous Everard said...

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November 07, 2011 12:05 PM  

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