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National Debt

Greece a Snap-shot of U.S. Future?

  • April 23, 2010

    With Greece teetering on the edge of defaulting on its loans, the U.S. needs to heed the warnings of this Mediterranean crisis as a potential signal of things to come in the U.S.

    The Greece, like the U.S., soends significantly more than they bring in and as the spending has continued and time has passed, their government is now unable to repay the debt that has accreud over the years, risking default if a bailout package is not provided.

    The Greek government, in 2009, spent almost 14% more than it brought in through taxes and other revenue.  By contrast, the U.S. spent about 10% more.

    Our country has continued its ominous path of over-spending and fiscal gluttony, and have done so largely by borrowing and financing debt.

    Eventually, our debt will literally crush our economy and cause a financial crisis that makes the 2008-09 event look like a hiccup.

    The first thing that will happen is that other countries and investors will stop purchasing our debt since there is so much of it and because their existing holdings (bonds) will lose their value.  Should these investors seek to cash out their holdings, this would actually bankrupt our country and drive the value of the dollar to historic lows, which in turn would raise the costs of everything exponentially for U.S. consumers and others who use the dollar as currency.

    China, the largest holder of U.S. debt, has repeatedly warned the U.S. about its spending and the need for the debt to be managed better; if they were to stop buying our debt, or worse, demand payment on their bonds, that alone would trigger a crisis all on its own.

    Greece, however, has an ace in that they are part of the European Union (EU) and the EU is required to back member countries in the face of such a crisis.  While there are mumblings from other countries about bailing out Greece, most notably from Germany, the liklihood that Greece will be allowed to collapse is minimal.

    The U.S. has no such network, and although it is the largest economy in the world and would cause a world-wide recession of proportions never yet experienced, no country is required to help the U.S. dig itself out of the mess it would find itself, especially since all the other countries would be too busy trying to save their own economies.

    With a nation of leaders afraid to tax citizens enough to maintain the country, the only solution is for the same scared elected officials to drastically curtail spending and rein in big-ticket expenses, especially wars and foreign aid, as both do little to improve the conditions of U.S. citizens.

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