The Complicated Debt Equation and Social Panic
Pay attention, America, you're next.
Ambrose Evans-Pritchard via the Times (h/t Western Rifle Shooters Association):
The world's five biggest AAA-rated states are all at risk of soaring debt costs and will have to implement austerity plans that threaten "social cohesion", according to a report on sovereign debt by Moody's.
The US rating agency said the US, the UK, Germany, France, and Spain are walking a tightrope as they try to bring public finances under control without nipping recovery in the bud. It warned of "substantial execution risk" in withdrawal of stimulus.
"Growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion," said Pierre Cailleteau, the chief author.
"We are not talking about revolution, but the severity of the crisis will force governments to make painful choices that expose weaknesses in society," he said.
If we aren't talking about revolution, would Mr Cailleteau care to let us know what it is we are talking about?
Beware the debt spiral, coming soon to a small Midwestern town near you.