Can some explain to me the difference between Greece and the US?

[Anonymous]

The generally accepted principle is that the Greek government has overspent its income for years, funding the overspending with bonds. How is that different from the US economy?

[Anonymous]

Their debt level is nearly twice its GDP. And the financial markets have much less confidence that the government can cover its debt. That's really it.

[Anonymous]

how does the US debt level compare to its GDP?

[Anonymous]

I'm not an economist but i subscribe to Economist magazine. May 8 issue says Greece has a negative trade balance of 43.6B and current account balance of neg 40.9B which is neg 6.9% of GDP. US is neg 532.9B on trade, neg 419.9 on acct balance and neg 3.3% of GDP. US budget balance % of GDP is neg 11.1% while greece is neg 9.4%. us govt 10 bond is 3.54% while greece is 10.33%. The numbers are amazing - Germany has pos 198B in trade.
Hopefully someone can interpret this all. it is scary.

[jsteele]

Greece's public debt as a percentage of GDP is over 100 percent. The US's ratio is 53 percent. For what it's worth, Germany's ratio is 77 percent.

This is a very complex topic that does not lend itself to easy explanations and it is beyond my ability to give a definitive explanation. But, the short term issue is how do countries finance their debts. Greece used "creative financing" over a period of years. Just like many of the US homeowners who used creative financing, when push came to shove, they had no way to pay. Now Greece is having trouble refinancing, let along floating new loans. For better or worse, the US is still seen as a good risk as far as loans are concerned so we are able to borrow easily.

Longer term, how the borrowed money is spent is crucial. Greece was using it's money to pay for a fairly lavish welfare state and a lot of governmental waste. There is little to no return on that sort of thing. Similarly, the money the US spends on foreign wars are not likely to have significant financial returns for the government (though they are doing wonders for the likes of Halliburton). On the other hand, much of the stimulus spending of the Obama administration will provide a return on investment in terms of new jobs, growth-inducing infrastructure, etc. As a result, in comparison to Greece, the US is much more likely to experience economic growth which will increase our ability to pay back loans.

So, in comparison to Greece, the US has less debt percentage-wise and a greater likelihood of growth. Hence, we are at much less risk of defaulting on loans. As such, not only is financing available more widely to the US, but at lower costs.

[Anonymous]

Interesting related discussion from a NYT column--

http://www.nytimes.com/2010/05/12/business/economy/12leonhardt.html

[Anonymous]

Also, Greeks eat more fish and vegetables than people in the US. They also drink more wine, and are more likely to smoke.

[Anonymous]

Anonymous wrote:The generally accepted principle is that the Greek government has overspent its income for years, funding the overspending with bonds. How is that different from the US economy?

One other point that no one seems to have touched on is that Greece ceeded the ability to set their own monetary policy when they joined the EU. This is actually the most salient point, and I'm surprised no one's touched on it yet.

And yes, if the various "Gold Standard" crackpots had their way, we'd would be like Greece.

[Anonymous]

More here on Greek monetary policy:

http://yglesias.thinkprogress.org/archives/2010/04/today-in-greece-wonkery.php

[Anonymous]

Greece has been the beggarstate of Europe. I lived there as a young girl and again as a young lady. The meteoric rise from Zorbaesque 3rd world village life to Chanel shops lining the main drag (all funded by loans) from Europe, and the insane sense of entitlement/resentment... yikes. They've been heading for a fall for a while. We may be too.

[Anonymous]

Lots of income untaxed...that would be some form of barter or right out corruption.

[Anonymous]

OP, you have a good question, but the question I have is: What is the difference between Greece and Spain, Italy, Iceland, or Ireland?
Then the next question is can the rest of Europe bail them all out?
If not, what does that mean to us here in the US?

[Anonymous]

OK, I am guessing that they are also not doing a great job managing their debt, that Europe cannot bail them out, and that it impacts us because the credit markets are global and because U.S. institutions hold a substantial amount of their national debt, although a fraction of what Europeans hold.

How'd I do?