Here’s a good (but depressing) symposium on the possibility of a U.S. sovereign-debt crisis featuring Tyler Cowen, Arnold Kling, Garett Jones, Peter Wallison, Joseph J. Minarik, and Jeffrey Rogers Hummel. The authors were asked to speculate on possible tipping points, associated triggers, and on crash dynamics (what happens in the crisis).
Tyler Cowen introduces the symposium:
When it comes to a sovereign debt crisis, it is no longer possible to say “it can’t happen here.” Right now we are borrowing about forty cents of every dollar the federal government spends, and the imbalance has no end in sight. The American electorate has dug in against both major tax increases and major spending cuts. Super-low borrowing rates have made it all the more tempting to maintain and indeed extend budget deficits. Keynesian economics promises that more government spending will stimulate the economy and create jobs.
More and more economists and budget commentators believe we are in for a rude awakening, and I don’t mean thirty or forty years down the road. I mean within the next ten to twenty years or maybe sooner. Yes, U.S. bond rates are remarkably low, but they were low for a lot of the Eurozone just a few years ago.
I particularly like the entry by George Mason University’s Garett Jones, called “The Bond Market Wins.” It opens with this great quote by James Carville:
I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.
If you are interested in the issue, watch this discussion of the issue with NRO’s Reihan Salam, Garrett Jones, and Arnold Kling: