Inflation and Deflation Threats Decline - WSJ.com
It was interesting to hear a commentator just now on Bloomberg point out that total Greek debt, including private bank debt and owed to the ECB is 1.25 trillion euros. He said, if Greece leaves the euro, then none of this is likely to repaid - at least in the near term.
This certainly has the ring of the housing bubble and, as you suggest, the end result is that savers and banks (who via Basel ... are to treat sovereign debt as 'safe') will face huge losses.
Spain, etc. are in trouble because rates have moved into the 6-7% range for government debt. What about the US? The Democrats seem to think social spending can go on forever with no consequences.
It looks like Greece will show the consequences - i.e. the lenders just don't get their money back.
All the public unions with their fat taxpayer paid pensions should be very leery - but ostriches sleep better at night.
As the article points out, 'perception' counts. Liberals are trying to build up the perception that the US will always pay its debts. But a bankers know with families and credit cards, at a certain point, the bank needs to stop lending and raise rates (i.e. what is happening in Southern Europe).
People also forget that after the Revolutionary War, government debts were often unpaid in cash or specie.
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