Thursday, June 16, 2011

Greek default now previews our own debt ceiling defaults in August


ABC News World News Tonight, with reporter Jake Tapper, reported “in plain English” on how a default by Greece, which is already happening, could affect the US economy and security markets.

American banks are indirectly exposed to the risk of Greek bond defaults because of their labyrinthine relationships with European banks.  Furthermore, a full default by Greece could be followed by other countries (Portugal, Ireland, maybe Spain).  American banks would have to raise mortgage and other interest rates quickly, and more US layoffs could occur because of European problems, stalling the recovery further.

It’s ironic to hear discussion of the effect of the Greek default now six weeks before “GOP to Country: drop dead” on our own debt ceiling. ABC news also has a video on the Treasury’s “auction room”.
Greece is facing riots because of the draconian nature of its cuts, including those of salaries of government workers.  Comparable cuts in the US would affect social security and Medicare beneficiaries now.

Michael Murray provides the reports.

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