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September 08, 2010
Brattle Senior Advisor Mark Williams Authors Opinion Piece in Financial Times on the Solvency of the U.S. Economy

Mark Williams, a senior advisor to The Brattle Group and a professor of finance at Boston University, authored an opinion piece on the solvency of the U.S. economy for the September 8, 2010 edition of Financial Times. Mr. Williams writes that although economic projections are showing an increasing federal deficit, the U.S. economy is remaining relatively steady with a debt-to-GDP ratio of 94 per cent. Debt-to-GDP is one measure touted as proof of U.S. insolvency; however, even when relying on just this single measurement, the U.S. looks good compared to nations such as Japan, with a debt-to-GDP ratio of over 190 per cent. Mr. Williams acknowledges the nation’s mass debt, but points out that one must take into account the cyclical nature of debt ratio and look at how the world capital markets price the chance of sovereign bankruptcy. Many sovereign states that have defaulted have done so on foreign-currency dominated bonds. The U.S. issues bonds only in domestic currency and therefore avoids defaulting on foreign-currency denominated debts such as countries including Russia, Venezuela, Peru, and the Ukraine in recent years. As Mr. Williams notes, the economic recession is not exclusive to the U.S., and the recovery will be a global exercise in cost-cutting. To read the opinion piece, "Ignore the hyperbole: America is not bust," please visit the Financial Times website.

Mark T. Williams
Academic Advisor
Boston University
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