No, the United States Will Never, Ever Turn Into Greece

The Atlantic ^ | 03/08/2013 | Matthew O' Brien

[SeekAndFind]

Have you read the opinion section of any newspaper in the last three years? Yes? Then there is a better-than-even chance you have come across some impressive-sounding analyst predict that the United States is "turning into Greece."

Maybe it's been a while, so we'll recap. The short version of this story is that we'll spend ourselves into bankruptcy. The longer version says that too much public debt makes markets nervous. Nervous markets demand higher interest rates. Higher rates mean higher deficits and lower growth, both of which mean more burdensome debt. More burdensome debt makes markets even more nervous. And around and around we go in a vicious circle into insolvency.

As far as scare stories go, this is pretty damn scary. It's also just a story. Rates haven't risen as debt has the last few years; they have fallen to historic lows. Of course, that hasn't stopped the Greek chorus from predicting that the economy is going to Hades. But when? Is it when debt reaches 100 percent of GDP? Or 90 percent, as Carmen Reinhart and Kenneth Rogoff famously argued?

What about 80 percent?

That was the bright white line drawn in a recent paper by David Greenlaw, James Hamilton, Peter Hooper and Frederic Mishkin. Greenlaw & Co. ran regressions on 20 advanced economies from 2000 to 2011 to see if there's a relationship between a country's borrowing costs one year and its gross debt, net debt, and 5-year current account average the previous one. (Glossary Interlude: Gross debt refers to the total amount of debt, including debt the government owes to itself. Net debt is the amount held by the public, minus any government assets. Current account is the balance of trade, which includes both net exports and net income on foreign investments).

[cuban leaf]

We have passed the “Event Horizon”.

---

Yep. That was around 2007. It’s why, two weeks before the 2008 election, I bought a small farm in central KY and, in late summer of 2011 moved there from my home of 45 years, Seattle.

On a side note, if the pink pony people turn out to be right, we still made a great move. We LOVE it here. Wish we had done it 30 years ago.

[editor-surveyor]

Turning into Greece?

Looks to me like we’re there.

Our productive class has definitely fallen below 50% of the population; that seems to me to have tipped us to the negative slope.

[RckyRaCoCo]

That's because the U.S. has a monopoly on...monopoly money...

(hmmm, isn't "monopoly" a "Greek" word for counterfeiting or something? /s)

[PLMerite]

Whereabouts in Kentucky? I’m looking for someplace to move away from the Zombie Ground Zero that is the Washington DC area, in a few years.

[alloysteel]

Another of history’s Fatuous Platitudes. OF COURSE America will slide into the tar pit that has trapped Greece, it will be Greece raised to an exponential degree. Before long, the world is just going to agree that the US currency is just so much worthless paper, and stop trading in terms of “dollars”.

There will be some arcane “basket of commodities” on which the weighted values of foodstuffs, energy sources, precious metals and technological engineering products will be the standard of trade, and the dollar will be cut loose, to seek whatever level it can.

Then, if the US Treasury attempts to borrow, they shall be subject to the same strictures on the market that everybody else is - how you gonna pay it back? That mafioso that runs the world financial markets will use this leverage to go out breaking kneecaps and selecting assassinations to force compliance.

I do not see any prospect for a fair and free world any time soon.

[blueunicorn6]

Gosh, the US will never be Greece. The level of writing has certainly improved at the Atlantic.
The Atlantic - full of old wrecks, crabs and fish s**t.

[albie]

Don’t forget the classic...”I’m from the government and I’m here to help”.

[cuban leaf]

“central” is as specific as I’ll get.

I’ll throw out two hints:

1. If you search “kentucky” in google maps, the “dot” is within ten miles of my home.
2. I live in cornbread mafia land. (google it)

[Georgia Girl 2]

Apparently this guy is unable to grasp the concept of “artificially low interest rates”.

[MrB]

You should take steps to live a better life
whether things get bad
or not.

[Viennacon]

I am reminded of all those “Greece will never be Zimbabwe” articles.

[SampleMan]

Not all debt is created equal. Countries that borrow in a currency they control play under a different set of rules.

There was a time when Greece could borrow and repay in its own currency too. Same with every other country with a crappy economy.

There will come a day when the U.S. cannot repay debts in U.S. dollars.

We are Greece.

[qam1]

No we won’ be Greece,

We will be Zimbabwe

[MrB]

A half-hour span double post?

[Salman]

Turing into the Soviet Union is a lot more likely than turning onto Greece.

[PLMerite]

I’m sure it’s a sight better than where I am. I’m looking for someplace where I can get enough arable land to make a stab at being self-sufficient for when/if/when the grid goes down.

[AuntB]

More likely that we’ll turn into Mexico. Many places in this country already have. Have you seen some of the Colonias near the Mexican border???

[Twinkie]

Yeah. We’re there. U.S. is the “eagle’s wings” that are plucked from the back of the “lion” (U.K.) in the book of Daniel. (Irvin Baxter, End of the Age)