[quote=urbanrealtor]
The problem with us “becoming Greece” is that all of Greece’s debt was externally denominated.
[/quote]
That is not really correct in the sense it is for say Hungary since Greece is a member of the EMU and the EURO is their internal currency.
I agree that we have the option to devalue our currency and they don’t. I don’t agree that this is a painless solution to any of our problems.
The fundamental problem Greece has is that their interest rates are now much higher than their economies growth rate so their debt continually grows in relation to their ability to pay. They are running large deficits which also accumlate to their debt. Further, they need to continually refinance their debt at higher rates as it comes due which increases their deficits.
Most americans have a certain arrogance with regard to the dollar that leads them to believe it will be trusted world wide no matter how many we print, how big our debt grows, or how big a deficit we run. All past experience has shown it to be (almost) as good as gold and it will continue to be until there is a loss of confidence.
I don’t expect the next few years to be too confidence inspiring.
