The myth behind all modern economics, which is to say Keynesian economics, is that “the government can always pay.”
It was one of the myths that allowed governments to think they could get away with bailouts, backstops and efforts to “stimulate” their country’s economies with truckloads of borrowed money (a failure of economic theory now exploded by the failure of all economies to be so “stimulated”).
But the debt is now due for all that senseless borrowing. And they can’t pay. They just can’t. There isn’t enough money in the world to pay all the debts they all racked up in a vain attempt to turn bad times into good.
That is the root of the problem in the US, in Japan, in Greece, in Italy, in Spain … and now in Germany.
Because last week saw the beginning of the collapse of even German government bonds (the market for which hit the jitters last week) which suggests the myth that “the government can always pay” is being exploded.
If even the German government can’t attract buyers of its debt, then what’s the future for every other government? Including ours?