Friday, July 22, 2011

History has a sense of humor, but it's a little dark for me

My roommate made an interesting point tonight:

In Europe right now, everyone is properly freaked out by the prospect of a Greek default. This small country, with a GDP of $300 billion and a population of 11 million, is the subject of great global consternation, with all manner of international organizations and economic entities stepping in to stave off the worst case scenario.

Meanwhile, just across the Atlantic, the United States -- with a GDP of over $14 trillion and holder of the world's reserve currency -- is openly toying with the idea of default. And as far as I can tell, the rest of the world has barely noticed, and barely cares. The only people who seem interested in preventing a total meltdown are a handful of D.C. wonks and a few moderate congresspeople.

Just judging from the respective reactions, you'd think the roles had been switched: that Greece was the linchpin of the global financial system, and that the United States was some kooky European country living beyond its means.

Of course, you can't really blame the world for its relative calm. After all, nothing about the American situation remotely resembles the Greek situation. Greece borrows at 35 percent over two years, while the United States can borrow for thirty years at under 4.5 percent. Greece's debt is denominated in a currency whose valuation is unrelated to Greek economic performance, while American debt is in its own currency. Greece has no strong central bank, while the US has the Fed. To the rest of the world, a US default would be an inexplicable economic suicide, a defiantly irrational event completely out of place in the modern world -- perhaps more akin to some sort of prehistoric mass delusion, in which a passing comet induces entire villages to set their children and livestock on fire.

The rest of the world just doesn't realize that things here in America are more complicated than that.

Wait, things here in America are more complicated than that, right...?

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