The Greece Analogy

Some folks in the financial industry believe that Greece is so tiny compared to the USA....that what is happening there could never happen in the USA.

I disagree and have posted before that I believe what we are seeing in Greece may be a foreshadowing of what may come for us.

Yesterday in the Wall Street Journal, Alan Greenspan wrote a column that points out some pertinent reasons why he believes that unless the Western world has a "tectonic" shift in fiscal policy.....he believes that Greece may be our future.

Beneath the calm, there are market signals that do not bode well for the future. For generations there had been a large buffer between the borrowing capacity of the U.S. government and the level of its debt to the public. But in the aftermath of the Lehman Brothers collapse, that gap began to narrow rapidly. Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008. How much borrowing leeway at current interest rates remains for U.S. Treasury financing is highly uncertain.

The current federal debt explosion is being driven by an inability to stem new spending initiatives. Having appropriated hundreds of billions of dollars on new programs in the last year and a half, it is very difficult for Congress to deny an additional one or two billion dollars for programs that significant constituencies perceive as urgent. The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms. This is not new. For at least a quarter century analysts have been aware of the pending surge in baby boomer retirees.

The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy. Incremental change will not be adequate. In the past decade the U.S. has been unable to cut any federal spending programs of significance.

See it here; http://finance.yahoo.com/banking-budgeting/article/109852/us-debt-and-the-greece-analogy?mod=bb-budgeting&sec=topStories&pos=6&asset=&ccode=

The word "tectonic" indicates that he believes continent moving huge changes are necessary to stave off catastrophe....a handful of little changes will not be adequate.

What do you believe are the chances that those in Washington D.C. will have the fortitude and leadership ability to make "tectonic" changes as to how Washington currently spends money and to change the programs that now 50% of the country are reliant on?

What do you believe the chances are that Washington continues spending as usual until a catastrophe falls on it and they have no other choice but to react?

I think we all know which one of those above scenarios have the greatest likelihood.