Paul Krugman on something I emphasized in a recent post, the danger of "excessive leverage":
Thinking Straight About Debt: A heads-up: I’m doing This Week this week. Also on the panel: David Stockman. This should be, um, interesting.
So, a few more thoughts on debt and what it does and doesn’t signify. ...
This is how you want to think about debt: it’s not a burden on the nation’s resources, because it’s mainly money we owe to ourselves, and it’s a problem not because we have to tighten our belt but because debt is currently leading to spending that’s less than we need to maintain full employment.
I would add that ... the ... debt of financial intermediaries ... is a big part of the real story and if anything bears even less resemblance to the notion of debt as a consequence of national overspending; to a large extent it’s just an accounting issue, because old-fashioned deposits aren’t counted as debt even though they are.
Maybe a short way to put all this is to say that we have a real problem with excessive leverage; that’s not at all the same thing as the nation being deeply in hock to some external player or players. And failing to understand that difference is a way to get both the nature of our crisis and the shape of appropriate policies totally wrong.