A Fable of Two Countries

What is the history of these two countries? You would not buy a bond w/o that information.

Steve

What about country I's inability to control it's own money supply?

Whilst all of U's debt is denominated in a currency it wholly controls?

Italy and the United States?

How can country I be called the "good" country if it had a deficit larger than the "bad" country's?

Interest payments count too. If "I" has to pay a higher interest rate, it needs to spend less elsewhere, or tax more to cover those interest payments.

Judging a country on "Spending on everything other than interest payments" is like judging a consumer on "spending on everything other than cocaine." Why should interest, or cocaine, be exempt from the evaluation?

Perhaps I'm missing the point?

My two cents? It's just a question of timing. Look out for first J and then U to follow I over the next few years.

personally, I suspect we'll see some trillion dollar platinum coins being minted before too long, specifically to wipe out U's debts.

It can't be Italy and the U. S.: I and U have the same GDPs.

I give up. Is this just a hypothetical or do you have specific countries in mind?

@Dave Schuler: GDP per capita might be a better proxy. Let's call it about 40,000 USD. Give it one more look.

I is for Ireland

Ireland's per capita GDP is about 20% lower than U. S.; Italian GDP per capita about 50% lower.

I repeat: is this a hypothetical?

I would also suggest that size matters. GE, whose revenues per employee are about a half million, probably pays a lower interest rate on its debt than a cardiac surgeon whose income is a half million.

Um, 7% of $60 is $4.20, right? The numbers have to be skewed more to make your point. And the vigilantes have to stay out in force for quite a while even with the 6% (2% vs GDP) deficit (~10 years before I catches up with U.)