While Greece is suffering from a protracted debt crisis, facing new tough reforms, the question arises whether if the United States will soon become incapable to handle its own growing debts, asks Romina Boccia, the Heritage Foundation’s Grover M. Hermann Fellow in Federal Budgetary Affairs.
“The United States differs from Greece in important ways. The US economy is much larger and better diversified. More than half of the US debt is held by creditors within its borders, rather than by foreign entities. Moreover, the United States also creates its own money, enabling it to devalue its currency and debt to avoid defaulting on payments for a lack of cash,” the analyst underscored.
The world authorities have run out of ammunition as rates remain stuck at zero. They have no margin for error as economy falters
The world economy is disturbingly close to stall speed. The United Nations has cut its global growth forecast for this year to 2.8pc, the latest of the multinational bodies to retreat.
We are not yet in the danger zone but this pace is only slightly above the 2.5pc rate that used to be regarded as a recession for the international system as a whole.
It leaves a thin safety buffer against any economic shock – most potently if China abandons its crawling dollar peg and resorts to ‘beggar-thy-neighbour’ policies, transmitting a further deflationary shock across the global economy.