Friday, June 17, 2011

Europe Debt Crisis a Window Into America’s Future

By Robert Romano

The sovereign debt funding crisis ravaging Europe is a window into America’s future, should Congress fail to find a way to rein in the $14.3 trillion national debt this decade. The only difference is there will not be anybody to bail us out.



In Europe, troubled sovereigns like Greece (€110 billion), Ireland (€85 billion), and Portugal (€78 billion) have all received massive loans from the European Union, International Monetary Fund, and the European Central Bank. Already the first bailout to Greece has failed, and the banks are pushing for another one.

These bailouts actually fail to help the sovereigns settle any debt — they do not pay off any principal owed. Instead, these are merely kick-the-can refinance loans, ostensibly to provide temporary relief until bond markets can or are willing to once again fund the nations in full.



So, the result of the bailouts is these nations go deeper into debt — which is no solution at all.

In other words, countries like Greece’s debts have become so large, they cannot be refinanced, let alone repaid, without a printing press.



So far gone are these nations’ finances, many observers acknowledge that some form of debt restructuring and even partial default is a necessary step to take to once again bring order to their fiscal houses.

Get full story here.

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