I’ve shared BIS and OECD data showing that the United States has a bigger long-run fiscal burden than Europe.
That’s a bit of a strained comparison since “Europe” includes fiscally responsible countries such as Switzerland and Estonia, but also soon-to-be failed states such as Greece and France.
But the one common theme, as I explain in this interview for Fox Business News, is that nations get in trouble because they violate Mitchell’s Golden Rule. In other words, the burden of government spending climbs faster than the private sector’s ability to finance it.
It was almost an afterthought, but I also made a very important point about the risks of using bad monetary policy to finance government spending.
Sort of the same story told more humorously by this special Ben Bernanke toilet paper. Or this video from Bernanke’s childhood.
Which is quite a shame since paper money in the western world was a creation of the private sector and only became a vehicle for bad policy once it was monopolized by the state.