It has been said that, if someone makes a mistake, the only really stupid thing to do is, not to recognise it and correct it.
The other day I made a mistake: from a certain point of view prehaps I made two. I began this post:
Saying I was no economist, and then proceeded to tackle the economics of the US debt crisis. As to whether this was a mistake is debatable, since I find it hard to learn anything without taking on subjects I am less familiar with. However having taken on the subject I singularly failed to understand the distinction between ‘External Debt‘ and ‘Public Debt‘.
To be fair to myself as regards to the US debt crisis, the distinction is a difficult one, since the ‘External Debt’ is $14.39 Trillion, and the ‘Public Debt’ is, $14.77 Trillion, and this is probably where my confusion arose.
My mistake is only really very obvious, when talking about the British economy, where the external debt, is a mind boggling $8.981 Trillion, but the public debt is a far more managable, $1.265 Trillion. Still too large at 53.5% og GDP, but more managable.
For those who aree just as ignorant as me of these things The ‘Public Debt’ is what the Government Owes, the ‘External Debt’ is what people and business in the country owe to people and businesses outside the country.
Fortunately, by acknowledging my ignorance too begin with I covered myself, and even more fortunately my mistake does not particularly alter my argument, that the debt of Western Economies is somewhat alarming, that the US Debt is particularly concerning, and that cuts are not going to cut it in the long run. Taxation will have to be a part of the solution, and taxing 95% of the wealth available makes more economic sense than taxing 95% of the people.
As a Briton though I am somewhat relieved that the position is not so out of control here, as I imagined a few days ago. And hopefully all that external debt is financing a Keynsian escape rout from the current situation, though economic growth of 0.2% is not all that reassuring.