BusinessDaily.eu – By Mikkel Egesberg –
I think there is too much focus on the socalled “European debt crisis” by European and especially the US media. The average EU(27) debt to GDP is 84,9% of GDP, whereas the US debt to GDP is 104,8%. If we focus on just the Eurozone, it’s debt compared to the GDP is 90%, which is also well below the US 104,8%.
In short, why is there so much talk about a “European debt crisis”, when things are much worse in the USA?
In the EU the countries are trying to balance their budgets, which is never popular with the affected part of the population, but however necessary. In the US they can’t agree balancing the budget, as we have just seen with the “Fiscall cliff”. The US has a federal budget deficit on 8,5% of the GDP in 2012, much higher than most EU states, but all US politicians do, is to raise the US debt limit of 16.394 billion USD, as the US Congress has done 13 times since year 2000, and which they will probably just do again very soon, since they are about the hit the latest debt limit. What happens then is the US issue more debt, and the US Federal reserve prints lots of new money to buy this new debt, which with a fancy word is called “Quantitative Easing” or “QE”, “QE2” and perhaps soon “QE3”.
The difference between the EU and USA is that Eurozone countries can’t print their own money each time they spend more money than they have, since they share the Euro with other EU countries. The US can and does. In short, EU has chosen the hard way, while USA the easy way. EU countries balance their budgets, by raising taxes or cut costs, which causes riots in e.g. Greece in the short run, while USA just prints a massive amount of dollars. In the long run, the US and countries using the US dollar will see a rise in inflation, since more money chase the same amount of goods. It too is a tax on citizens, but a tax by stealth, since most US citizens won’t know what hit them, when prices on their goods go up. This should be an argument for the Euro. In the long run EU citizens will have a lower rise in prices than US citizens, and EU don’t have to import US inflation, as we would do, had we used the US dollar for European trade.
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