We're already Greece, the bond market just doesn't know it yet.
Friday on CNBC. Great clip. Transcript is below.
The U.S. Debt Machine rolls on, borrowing $50,000 per second.
- Blink! U.S. Debt Just Grew By $11 Trillion - Bloomberg
- Why $16 Trillion Only Hints at the True U.S. Debt - WSJ
stan druckenmiller sounding the alarm on our government's debt and spending expenses warning on this program yesterday that a bond crisis could still be at hand. you know, the bond market is a funny thing. in greece the bond market was perfectly fine until february of 2010. not moving. not doing anything, and then in two weeks it was over, but if we don't deal with it in the next four or five years, the same thing is going to happen. we're going to wake up. interest rates are going to explode and the next generation, they are going to have a very, very tough time and it's so unfair. no surpr that our rick santelli agrees with druckenmiller but dean baker is not worried. he says this isn't and will not be greece. dean, where do you think druckenmiller is going wrong then? we've been hearing these things for four years and i'm three big differences between the united states and greece. first, we're a huge diversified economy, not a little country dependant on tourism. secondly, people in the u.s. pay their taxes, you know. greece had a deficit of about 7% of gdp. that wover $1 trillion a year in the united states before the collapse. we have a very different story. the third is a huge diff. we have our own currency. greece is like arkansas. the reason why its interest rates went through the roof. everyone thought that. i think the point he was trying to make in that that if we don't do something about this the market will figure out that we have a credit problem in the country. the markets are smarter than that. when you normalize interest rates, right now they are really manipulated, if you normalize interest rates, you're talking about $500 billion going out the door every year just on interest expense. that's just paying the interest on the debt. you think that's sustainable? that's a lower interest expense than what we had relative to our economy in the early '90s. we could live with that. we lived with that in the early '90s and the economy did great in that decade?
rick, what do you think?
i think that we have so many os stritches i don't think we have enough stand. whether it's mr. druckenmiller or barron's this week. dean is pretty clear, we aren't greece, but we can be. the math is the same, at least on its trajectory and he's hit all the highlights of why we bury our head in the sand. we're the reserve currency. we're right. we pay our taxes, he's right, except not everybody is required to pay federal taxes. i won't argue that point. according to the greek debt clock, every citizen is responsible for about 41,000. according to the u.s. debt clock everybody citizen is responsible for 50,000. according to baron's, if you look at public debt, okay, and i understand we're not counting underfunded lights which even bill gross said in 2011 makes our problem way worse than greece, we're at about 75% of gdp. they are at about 150%, but the trajectory at the current rate means in 22 years we will be them, and i -- that's a little wacky trajectory there, buddy. what's wacky? dean i calling you wacky. that assumes we have huge rises in debt. i hope he lives 22 years to tell his grandkids they are wacky when they are chasing them. my grandkids will tell me i'm whack if we follow the prescription of cutting the deficit and raising the unemployment rail even higher and putting their parents out of work. and that's what makes us different than greece. we can afford to pay to put people to work as opposed to people working in the private sector carrying their own load. just look at the infrastructure bank they are proposing. it's freddie and fannie. they are propose creating another freddie and fannie and what's worse, dean, it's going to be off balance sheet like wall street was doing in '07. had very good success with infrastructure. in the new deal they dealt lots of infrastructure we're still using today years later. that's what we need to do again. you're right. the private sector is not hiring these people. that's why the depression wouldn't have ended if it wasn't for the war. i see am tie scla's version. it's hard to take seriously. because it doesn't fit the plan you're trying to sell. if you can have growth with war and spend money on create jobs and have growth. why am i saying war? do you think i have any problem cutting the defense baby. you say we got out of the depression because of world war ii. okay. then let's put out the infrastructure toed bying, cut out all unions that basically put the guy in power and let's start there. you want to play it that way? we're a democratic country. can't get out unions. might not like them. people shouldn't join them. sorry, we're a democratic country. all that stuff is shovel ready, didn't we see this movie in 2009? we didn't need shovel ready as it turned out h.a lot longer recession they were betting on. you know what, dean? forget building bridges and building hoover dam, just get all these people to get teaspoons and pay them $20 an hour to move the sand from l.a. to new york and then back that's the same thing you're suggesting. at least they wouldn't be unemployed. if you think that's the answer, who you calling whacky. not my top answer, buddy. if you're not going to let me do something productive, i would rather pay them to move sand. we want to do something productive. we want government to quit controlling the treasury market and quit controlling the equity market and the quit controlling the economy. i think you've got a conspiracy theory. it's not a conspiracy. the markets are shot. you don't even get a signal like stan said. interest rates should be at 6:00 and then all of this would stop. i've been hearing this for four years. dean, are you saying we should not worry about the debt and it should not be a priority in terms of slowing down the spending? saying that as clearly as i possibly can. how can you say that? very easily. i just did. had a very small deficit going into this. how irresponsible is that? it's irresponsible. how come you folks weren't talking about the housing bubble in 2004, 2005 and 2006? i was. greenspan was. you're ignoring them now. greenspan was saying there was no double. what was barney frank saying? he wasn't going to pop it but recognized it was developing. it was his job to pop it. we agree on something. we're going off on a tangent, as fun as wonderful as this conversation has been, we seem to be going off on a tangent, but interest take there, that you don't think cutting spending should be a priority at all right now, dean. zero. even though there are expectations that the $16.5 trillion debt is going to 22 trillion very quickly in the next few years. yeah, and that's -- that's going to take us back -- our interest payments relative to the size of the economy will be lower than they were in the early '9 as. because the fed has trillions of dollars of treasuries, dean. it's a ponzi scheme. other people are holding those treasuries voluntarily. do i have a vote whether the fed keeps buying them? where do i go to stop the program? very important points you both made. see you soon. thank you so much, guys.
In case you missed it yesterday: