European Debt Crisis, will it hit the U.S.?

[SerScot]

Here's a Businessweek article on the growing European Debt Crisis:

www.businessweek.com/news/2010-04-29/vo ... -asia.html

Will it spread to our shores? What will the Obama Administration do if it does? Is this the start of the fall of the Euro?

Discuss.

[Orlion]

They shouldn't have let unviable countries (like Greece) into the Euro. That's what really brought it down, and that's what adding to the debt.

Will it cross over to our shores? I don't know... I don't think we rely too much on Europe anyway. What will affect us may be the Asian economic downturn. Maybe. A lot of times, these things seem to be as strong as there is paranoia surrounding them.

[sindatur]

Hm, you never know, depending upon how the speculators manipulate markets and international exchange, it could be good for economic comeback.

My biggest concern about our current situation is that our largest import (The US Dollar) might be replaced by a more stable dollar if we sink any frther into debt(Chinese or Euro, for instance). If Euro is getting backed up with debt, the USD Dollar has a chance to stabilize, and with the Chinese dollar weakening, our debt could be reduced if the US Dollar climbs. All this, if the speculators don't rape us, could allow us to gain international sales, and grow our economy. If the speculators do screw us, we'll go down in flames withe veryone else. (Of course it depends upon how much the Government sucks out of our economy as well)

[Farsailer]

The answer is yes, it most definitely will hit these shores. The problem is that the debt problem is contagious in Europe and as it spreads, we can't help but be affected by it.

Greece by itself is small change and yet there's a lot of squabbling over the bailout for them. Which leads me to wonder what is going to happen when the remaining PIIGS countries hit the debt wall as well. Ireland and Portugal are in the high 30's in world GDP ranking while Greece is in the high 20's. Not too bad yet... But what happens when Spain and Italy run into the debt wall as well? After all they are only the 9th and 7th largest economies in the world by GDP. There's an outside chance that even the UK could become mulch in this crisis: that would really shake things up as they are the 6th largest economy in the world.

My prediction in the short term: Greece will default. No doubt about it. Their unions have drawn the line in the sand regarding the austerity measures, believing somehow that they aren't necessary and flinging ad hominem attacks at all who would see them instituted. Greece BS'd its way into the Euro and they're now trying to BS their way through this crisis. So ... the voters will throw out the current rascals and the new guys will find out what a s--t sandwich they inherited. And at that point, the proverbial manure will hit the horizontal air impeller.

Germany has been most reluctant to bail anyone out; their own voters don't want to go there and will make huge trouble for Merkel. It's possible Greece, at least, gets kicked out of the Euro zone. Another problem is that the banks that could buy the sovereign debt already have their own problems as many of them were badly exposed in Spain and eastern Europe.

Regarding the problems with the debt here in the US: The mainstream media has really fallen down on the job of reporting our own Fed's issues. Leaving it to a few brave bloggers who have done the grunt work and can present us with their findings. There's some strong economic analysis in there that we're not getting from the mainstream media. And without exception they believe that the day is coming when even the US debt no longer commands the top rating. At that point, things will really get bad because the downgrade will force interest rates upward which in turn will hugely expand the portion of the national budget that is used to pay the interest. Which in turn will force us into austerity mode as well. The temptation to simply print away the debt will be enormous, but that way lies hyperinflation...

[Avatar]

As usual, I have no opinion on economic issues. But I'll keep reading the thread...maybe I'll learn something.

--A

[High Lord Tolkien]

Greece should just follow Obama and spend more and raise taxes. Problem solved.

[Vain]

I think when you consider that the US spent more money bailing out AIG than the EU is spending bailing out Greece, you get an idea of actual scale.

The truth is still that if the USA sneezes, the rest of the world catches a cold - and the rest of the world is still reeling from the cold the USA is going through.

I am actually more interested in the concept of a country going bankrupt. I mean how is that possible? It's not like a country can be closed down or anything - just ask Zimbabwe (OK they're quite messed up but still managing to do stuff)

[Avatar]

Greece should just follow Obama and spend more and raise taxes. Problem solved.

So have your taxes gone up?

--A

[sindatur]

Greece should just follow Obama and spend more and raise taxes. Problem solved.

So have your taxes gone up?

--A

State taxes, sin taxes, gas taxes, utilities taxes...yes. Federal Income tax, not yet, however, they took $8.00 a week less from my paychecks, supposedly as a favor for the stimulus plan ($416 for a full year) and I ended up owing $428 when I filed my taxes, I would've preferred they simply kept the damned $8.00 a week, then let me keep it peice meal and then expect me to pay it back in one lump sum at the end of the tax year

[Avatar]

And who determines state tax? (And it goes to the state, right?)

--A

[Farsailer]

And who determines state tax? (And it goes to the state, right?)

--A

The individual states have their own tax structure that is determined by that state. There are a couple of states that actually have no income tax, but they make it up through other sources. But I can confirm Sindatur's taxes have gone up because I also live in California as he does.

Here in California, just about every tax other than those on the federal level has gone up. You name it, income tax, property tax, sales tax, sin tax (alcohol and tobacco), state disability, business tax, utility tax, cell phone tax, cable TV tax, etc. They've gone up across the entire spectrum of income except that the poor do not pay any income tax. And it will only get worse from here. California already has the lowest bond rating of any of the 50 states so it's costing our state a crap load of money to keep borrowing. And they still can't stop spending in Sacramento!

[Vader]

As far as I understand the European debt crisis is part of the global economic crisis which started when US banks began to break down. If it affects the US now consider it a boomerang.

[Avatar]

And who determines state tax? (And it goes to the state, right?)

--A

The individual states have their own tax structure that is determined by that state.

So is it really Obama who has increased your taxes?

Ok, maybe we should get back on topic.

--A

[hierachy]

It seems to me that the current economic system is on its last legs regardless. Anyone want to start a fight club?

[SerScot]

Everybody,

Please understand I'm not accusing anyone or any State of anything in this thread. I'm simply asking if people think the current crisis will swing back and hit the U.S.? Heck, if the Euro collapses it could actually strenghten the Dollar as the Euro is a competing (allegedly) highly stable currency.

What about the Chinese idea of a unified world currency?

[High Lord Tolkien]

So is it really Obama who has increased your taxes?

--A

Directly? No. Unless you smoke.
My point was poorly phrased.
It should have been "spend like a motherf#cker!"
Just to be fair to Obama, there were a few increases in tax credits in 2009 as well for certain people.
But anyone who thinks the tax rate isn't going up on everything to pay for Obama/Dem spending is living in a fantasy land.
I hope I'm wrong though.

[sindatur]

And who determines state tax? (And it goes to the state, right?)

--A

The individual states have their own tax structure that is determined by that state.

So is it really Obama who has increased your taxes?

Ok, maybe we should get back on topic.

--A

I could be wrong, but, I thought Gas, Sin and Utilities taxes were Federal. If they're not, then no, no Federal Tax increases have hit yet, but, the States can't tax more to pay for the Medical Insurance reform, so, it will lead to more Federal taxes, and if they bring Cap and Trade to fruition, as is one of the Dems desires, it will be a drastic increase in a piece meal fashion.

[SerScot]

sindatur,

Wasn't the Federal Tax on Cigarettes raised to help pay for the expansion of the SCHIP program?

[sindatur]

sindatur,

Wasn't the Federal Tax on Cigarettes raised to help pay for the expansion of the SCHIP program?

Not sure, possibly, similar timing at least

[Avatar]

My point was poorly phrased.
It should have been "spend like a motherf#cker!"
Just to be fair to Obama, there were a few increases in tax credits in 2009 as well for certain people.
But anyone who thinks the tax rate isn't going up on everything to pay for Obama/Dem spending is living in a fantasy land.
I hope I'm wrong though.

Frankly, I'd be surprised if they didn't. Just not quite yet, is all I'm expecting (for you guys anyway).

What about the Chinese idea of a unified world currency?

I suspect we'll end up there. But not for another 100 years at least.

--A