Are you worried that the United States is looking a lot like Greece these days? You know, a country with big debts and under threat of one day defaulting on its debt obligations. You're not alone if the comparison has jumped into your head - but Paul Krugman would have you know that the comparisons simply don't work: The two countries couldn't be more different.
"I've been complaining for a while about the Hellenization of economic discourse - the way everyone is being treated as being just like Greece, when in fact Greece - with a long history of fiscal irresponsibility, very high public debt, and a country without a currency - doesn't bear much resemblance even to the other peripheral Europeans, let alone the United States," he said on his New York Times blog.
He pointed out that Greece's net debt as a percentage of the country's gross domestic product sits at about 150 per cent, while the U.S. ratio is about 70 per cent. While Greece's ratio should come down over the next five years, according to an optimistic scenario outlined by the International Monetary Fund, it will remain above 140 per cent by 2016; the U.S. net debt will continue to rise, but won't be much above 80 per cent by then.
At the same time, the United States has its own currency, and Greece is hobbled by the euro - which prevents the country from resorting to any sort of devaluation. Oh, and there's the difference in bond yields, which reflect the risk perception in the market. The yield on the 10-year U.S. Treasury bond is about 3.1 per cent, but Greek bonds are 16.8 per cent.
"Otherwise we're exactly the same," Mr. Krugman jokes.
David Berman