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Worse Than We Thought

Fridays often bring a flood of economic numbers -- lately, most of them are awful. Today, we also have lots of news.

Economy shrinks at fastest pace in 25 years: The government first estimated the fourth-quarter contraction as an annualized 3.8 percent. Economists expected that to be revised to 5.4. The final number: 6.2. Youch!

Government to take bigger stake in Citigroup: The U.S. will get as much as 36 percent of the corporation, with Citigroup converting up to $25 billion of the government's $45 billion in preferred stock to common stock. This makes Citigroup look better by upping its level of "tangible common equity."

Plus: President Barack Obama has turned in his first budget -- with its $1.75 trillion deficit. The Washington Post calls it "eye-popping." If you're thinking about national debt, you might start with "National Debt for Beginners," a primer from Simon Johnson and James Kwak of Baseline Scenario.

National debt is a tough nut, a long debate, but here's the gist from Johnson and Kwak:

[T]he short answer to the question of how much debt is sustainable is simple: We don't know. If we were close to the edge of some fiscal cliff, the market would warn us, under ordinary circumstances. But these are not ordinary times: Due to the upheaval in all markets, there is a level of demand for Treasuries that is . . . how shall we put this . . . probably not justified by economic fundamentals, and as a result market signals don't work as well as they should. Right now, the markets are saying that the U.S. government is as good a place to lend money as any and are implicitly giving us time to sort out our fiscal problems. At what point that will change, though, no one can predict.