Neither debt nor Sarah Palin seem to actually exist. Although Sarah Palin is tangible and debt is not, no one knows what either one is capable of doing, so everyone expects the worst.
I attempted to purchase the Economist today for the first time since my subscription ran out in Dec. 2008. Why was Sarah Palin in the Economist at all? It makes the same amount of sense as worrying about debt or sovereign default in an interdependent global economy. The state of Greece’s economy is “Pretty catastrophic” but nations with debt don’t disappear. People are still going to visit the Greek Islands, and Germany will still have a very successful economy. Greece may go into Sovereign default, but the population can also retire at age 54…
It seems like “wealthy” or “modern” (aka Western) states are in debt and “poor” or “developing” states can afford to purchase that debt. China purchased a significant amount of US’ debt because US consumers are what sustain China’s economy. If Western states stop buying, then what?
What is debt? We know that debt accumulates and we know that it can be leveraged, packaged and traded but because the global economy is so interdependent, states have an interest in never allowing “debt” to materialize anywhere.
My law firm defended a major investment bank that “collapsed” in March 2008. We were defending the bank in an arbitration involving a former employee (contract issue) in California when the bank collapsed. The arbitration continued along schedule, and my firm continued to collect payments. How is this possible? If an institution’s debt makes the institution collapse, what did it use to pay the outrageous legal fees? Why would a non-entity even need to defend itself?
Debt is more like a symbol than a real problem. Just like a swastika or a peace sign, debt only materializes when people choose to make it real. Admitting that debt is meaningless would destroy the credit markets and end the banking system and global economy as we know it. Like Sarah Palin, debt stands for something intangible and undeserving of the half-hearted attention we pay to it.
