Letter from Chip Northrup

U.S. a Banana Republic?

When I was an undergrad, I thought that everything could be explained by psychology. As a grad student, I came to believe that economics explains it all. Economics explains our priorities as individuals, as families and as a country.

Almost every country in the world has defaulted on its debt or devalued its currency at one time or another—with some notable exceptions being Canada, Denmark, Belgium, Norway, Finland, Holland, Australia, New Zealand and the United States.

The likelihood of default is based in part on the amount of debt to economic output, as measured by Gross Domestic Product. Denmark’s Debt/GDP ratio is 29 percent. Sweden is 31 percent. Venezuela, which has defaulted on its debt a dozen times, is 145 percent. The United States, which now has a ratio of 122 percent, is on track to match Venezuela’s debt to output ratio with the new Republican budget. Meaning we are becoming an economic banana republic, with a downgraded credit score to prove it.

Chip Northrup
Cooperstown