The two choices left to both governments are to ruin their respective currencies through hyperinflation, before “debt and promise” default is forced on them; or to have “debt and promise” default first, and save their currencies.
They are both weasel governments, so they will try to fudge their way through and cause hyperinflation. However, if it happened to Britain and the continent first, it would be better, because if the US saw what was happening it might *not* do the same. And from that position could help Britain and the continent.
But I’m not betting on it. These are people who are so timid and naive that basic pattern recognition is lost to them. They will stick with moribund Keynesian economics until they are thrown out of the lifeboat by those who are more pragmatic.
What it means once more sensible heads prevail is that the age of easy credit at all levels is over. Both governments will be forced into surplus budgets only because they have no choice. Largesse will be over, including Social Security and government medicine. And in the US, Defense will have to be cut by at least 50%, which means most overseas deployments will end, with just a few critical ones remaining.
It is likely that this will be forced, in the US, by the individual States, as the federal government is incapable of controlling itself in any way.
You may well be right about states taking the reins but hope remains for big changes in congress critter makeup in 2010— not just D—>R but in the prospect of true fiscally responsible and economically literate Conservatives gaining power and influence. Otherwise, you’re right, it will have to be led by key states... I can see no other path.