As with most financial crises, it's entirely man-made, and hence only as much of a threat as we allow it to be.
It's like this: Interest rates are staying low because (a) people aren't borrowing, (b) banks aren't lending, (c) businesses aren't making capital improvements, and (d) central banks are compensating by injecting liquidity into an economy that's still battling the after-effects of a balance-sheet recession. This arrangement hurts savers, wage earners, bondholders, pension funds and money markets, but on the plus side, it makes your debt a safe harbor for large institutional investors to park their money since there's no chance of the debt defaulting because you can always print more money. Which devalues the currency, true, but it also strengthens exports, so it's not without its social utility.
Now, this economic stasis can last for years (if our leaders so choose), with sluggish growth, low inflation, and chronic high unemployment as a result. Or, as an alternative, they could opt for a more robust strategy that would drive inflation, i.e., rising wages, and with it, consumer demand. But whichever path they choose, it's simply rank bullshit to claim that this is some existential crisis that requires us to slash trillions of dollars out of public-health and pension programs because of some "unsustainable" sovereign debt burden that's being forecast ten or twenty years out: (1) Because no one can make any realistic budget forecast that far into the future, and (2) because the people who are warning us most urgently about this are the same people who want to bankrupt the social-welfare function of government. Why? Many reasons, obviously, but the bottom line is that they're not nearly as interested in promoting balanced budgets and responsible governance as they are in promoting a political agenda. They've been doing it for the last 80 years using the same disproven arguments and the same catch phrases that they've always employed. What's different now, of course, is that they've managed to win the Washington messaging wars, and with it, the esteem of its most serious denizens. It's great fodder for the Sunday talk shows, but bad news for the rest of us.
---Baron V
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