Countries can get in trouble in a variety of interesting and imaginative ways, so saying that surplus countries can only get in trouble through genuine over-indebtedness and deficit countries can never have a genuine debt problem would be wrong.

What is true is that in the present crisis it looks very much like the deficit countries are having a currency crisis (because the attacks are highly correlated with foreign debts and current accounts deficits, and only weakly correlated with sovereign debts and deficits), and it looks very much like Ireland is having a genuine debt crisis (since its banks are insolvent following a real estate bubble that was not an obvious macroeconomic necessity).

- Jake

Friends come and go. Enemies accumulate.