“[Greek government policy is] known as ‘drinking your way back to sobriety’.
The deficit spending the Greek government wants to do is almost-entirely suppressive or neutral to GDP - it is spending by government, for government, on government. The population is shrinking, their internal revenue picture is already dreadful and only getting worse (because they have the worst ratio of producers to consumers of tax funding in the civilized world, and getting worser) and the only way any government of Greece can survive and keep the mayhem in the streets down to acceptable levels is to restore the drunken-sailor approach to public spending that got them into trouble in the first place. This means 14 monthly pension checks a year, retirement at 50 for workers in hazardous trades like hairdressing, and all the other 1,001 ways they managed to bankrupt themselves already.”
http://www.samizdata.net/blog/archives/2012/06/samizdata_addit.html
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And that, Lady's and Gentlemen, pretty much sums it up.
Unfortunately, it doesn’t seem like the Greeks are the only ones “drinking their way back to sobriety.” As I wrote, I don’t think governments are only borrowing to prop up their own debt. I think they’re actually borrowing to buy up the debt of other nations. That’s like using debt to finance debt, isn’t it?
The US apparently has more room to maneuver than Greece. We can manipulate interest rates, but what happens when we can’t make the payments even with a zero percent interest rate? Plus, we have something like $100 trillion of unfunded promises made, like Social Security, Medicare, Medicaid, etc. Is it possible to print that much money without blowing up the economy? I guess we’ll find out.