By Tom Bradley

In his June 6th letter, Tim Price of PFP Wealth Management in the UK provides a thoughtful take on our debt burden.

“From a narrowly financial perspective, government debt is an asset class, albeit an asset class now offering vast potential for capital losses for the unwary. From a broader social perspective, government debt is taxation deferred, a burdensome claim on all our individual futures, a reflection of wealth to come being diverted from the private sector to the state and its putative political leaders.”

Later in the piece he reviews potential solutions.

“When the problem is too much debt, there can only be three solutions. One is austerity, and as the UK (and Greece, and Ireland) is finding to its cost, it is difficult to cut your way back to growth. One is outright default, which is politically unpalatable (though may still be inevitable) given the extent of debt in today’s world. The third option is inflation – default by stealth, in other words. Even now, given the deflationary headwinds, it is by no means clear whether the west resolves its debt mountain by Options 1, 2 or 3. Perhaps we get all three. What is clear is that in protecting the interest of narrow financial elite, our politicians are lying to us about the reality.”

Given the severity of the debt problem, I have to think it will be some combination of all three, although the austerity may not come until we have another crisis.