Fed News Friday: US Debt Level “Horrendously Dangerous” and Greece on the Brink of Default
June 17th, 2011…states the Former Fed Chairman Alan Greenspan in a recent interview with Bloomberg. Not only is the US debt at a world record breaking level, some European countries who rely on the United States and its close friend in the Eurozone to stay afloat are approaching complete default. Greece is currently in the spotlight.
As the Eurozone plots to dissolve the sever debt with faux financing, rioters revive protests across the city of Athens. Greek demonstrators turned violent this week in protest to the austerity measures by Greece’s parliament. Greenspan stated that Greece’s likelihood of avoiding default is very low, and many are waiting for the “Lehman moment” in Greece.
How will the default of Greece effect the United States?
- If Greece defaults, the Eurozone has to step in to catch their fall. This means that Euro spending will be focused on damage control instead of US purchases.
- If Greece defaults, the likelihood of other European countries (Spain, Portugal, Ireland) that are teetering on the edge of economic turmoil will most likely take the plunge, which in turn takes even more potential resources from the US.
- Already there are violent protests in the country. Prime Minister George Papandreou hasn’t set in stone a plan to recovery, so protests could get worse. Will the US have to step in? The US military seems to be frequently instructed to get in foreign countries’ business. P.S. that costs money (the double-dip?)
- There could also be a positive effect. People in the US and in other artificially propped up economies could see the devastation that can take place from building a city with “toothpicks”. If or when the US must default on their debt, perhaps the mainstream can learn a thing or two about the dangers of inflation and central banking (repetitive I know).
So how will the Federal Reserve react to this inevitable default in Greece? The debt ceiling argument will end, and the US government will bail somebody out with somebody else’s money. The Federal Reserve will be right there to plot along the US’s side.
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