Borrow today, default tomorrow

Public-finance reform and the budget deficit have been constantly in the news, and right-wing economists have repeatedly criticized the cabinet of Vladimír Špidla for failing to curb the government's appetite for debt. The government, they say, is irresponsibly borrowing money today that will have to be repaid by our children. Even worse, what if the government knows that at least part of that debt will, in fact, never be repaid? Paul Krugman indicated in the New York Times that present and past U.S. officials are aware that America's double deficits are not sustainable and could lead to a financial crisis and debt write-off. Špidla, too, has indicated in interviews that he knows where things are headed. If lenders sense that a borrower knows he won't be able to repay his loans, it's only a matter of time before the rates skyrocket or the sources of funds dry up. trade balance