I’m in Europe to give a couple of speeches about fiscal policy, so I’m going to spend all week commenting on the continent’s (mostly miserable) fiscal policy.
Let’s start with comments about Italy, the nation most likely to suffer a crisis.
Normally, I tell people to focus on government spendingrather than red ink. After all, the economy is hurt whether spending is financed by taxes or borrowing (or printing money).
But I’ve also noted that governments sometimes spend so much money and incur so much debt that investors decide it is very risky to buy or hold debt from those governments. In other words, they begin to fear default.
When investors (sometimes known as “bond vigilantes”) reach that stage, they probably try to get rid of their holdings and definitely refuse to buy more debt. The net result is that profligate governments have to offer…
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Utopia, you are standing in it! 
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