As the extreme right-wing lunatics in the U.S. continue to wring their hands over our debt—completely ignoring how we're the world's reserve currency—it's helpful to examine what happens when a country actually collapses:
The yield on Greece ten year bonds increased to 14.9% today and the two year yield is up to 23%. Sounds like a credit event might happen soon. If so, I wonder if it will be haircut or an extension of maturities?
Here are the ten year yields for Ireland up to a record 10.5%, Portugal up to a record 9.5%, and Spain at 5.5%.
The problem, of course, is that Spain, Portugal, and Greece have to accept Euro-zone financial policies, which are generally anti-inflationary. Of course, if the pesteta, escudo, and drachma still existed, none of these countries would have the problems they face today. They'd have instead rampant inflation, which sucks for creditors but isn't so bad for debtors. They would, as well, face specific and predictable other problems, but as none of those issues has attracted the attention of cable news, few people understand why these countries have any problems at all, or who's responsible for them.
Most relevantly to the U.S., however, is that despite the loony right beating the debt-ceiling drum, and despite all the idiocy about the U.S. budget deficit, our biggest asset right now is that we're the world's reserve currency.
Few people seem to have noticed that if we threaten to default on our debt, or if we fail to pay any of it back—even for a brief moment—we're done.
There was a time, years ago, when the left went all to pieces over ideology. And I expect the right believed that the left were going to ruin Western Civilization if people voted for McGovern. But the key difference between then and now that I see—though in fairness through my leftish proclivities, which probably count for something—is that the left tried to end wars and reduce suffering in their craziness. It seems pretty clear the current right-wingnuts trying to take over the House of Representatives are fine with wars and poverty.
I think we'll get through this extreme swing of the pendulum, and 50 years from now we'll bemoan the ridiculousness of the left.
The frightening counter-example is, of course, Rome, which drifted so far right over three centuries that the citizens invited the Visigoths in to help them get out of Roman oppression. So who should we Americans look to for a similar salvation? I mean, if we're not going to fix things ourselves, which is probably the best long-term solution.