US debt ceiling parasitism

After the high drama and late night sittings and doomsday rhetoric and slap-stick performances in the US congress over the last few weeks, I can’t help feeling that Vladimir Putin has a point. The agreement reached last night could – and should – have been reached 2 months ago but the Congressmen and Senators could not resist trying to show how tirelessly they work for the nation’s benefit. Sometimes they remind me of the players in a cheap musical farce where the terrible music is only topped by the dreadful actors.

Wall Street Journal

Russian Prime Minister Vladimir Putin called the U.S. “a parasite” because of its huge debt load. ….. 

In a speech Monday, Mr. Putin said Russia and other countries should seek new reserve currencies to hedge against “a systemic malfunction” in the U.S. Both Russia and China in the past have questioned the dollar’s pre-eminence as a reserve currency and its role in international trade and investment. Russia keeps almost half its reserves in dollar assets. “The country is living in debt,” Mr. Putin told a pro-Kremlin youth rally in central Russia. “It is not living within its means, shifting the weight of responsibility on other countries and in a way acting as a parasite.”

Kipper Williams US debt crisis: 02.08.2011

Kipper Williams US debt crisis: The Guardian 02.08.2011

The U.S. government’s debt will hit 100% of gross domestic product this year, up from 62% in 2007, according to the International Monetary Fund. Russia has low sovereign debt compared with the U.S. and other countries, with its state debt representing just over 10% of GDP. Still, when all the debt of its state-controlled companies is taken into account, the state is on the hook for an amount equal to 20% of GDP, according to a Deutsche Bank report. Russia’s state debt is expected to rise to 30% of GDP by 2020, according to Deutsche Bank.

The deal to raise the U.S. debt limit announced Sunday by President Barack Obama was a relief, Mr. Putin said, “but it simply delayed a more systemic solution.”

Uncertainties about the U.S. economy already have pushed Russia to seek alternatives such as gold and other sovereign debt. Russia curtailed its purchase of Treasurys in the past year, down from $176 billion last October to $125 billion in April, according to Treasury Department data.

 

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