So Detroit is now Bankrupt...

[MikeRox]

darkknightkryta said:

MikeRox said:

Greece, Portugal and Ireland have all required bailouts from the EU to stop them going bankrupt. Spain and Italy are also currently struggling quite badly with financial problems. They are all suffering from very high unemployment and ongoing recessions.

France are in a much better position, but there are concerns for them too. The UK was a big worry, but at the moment recent data has been relatively positive. Though it has turned out our recession in 2008 was far bigger and deeper than anybody had previously thought. Germany have weathered it fairly well throughout, but their population are getting a bit fed up of the "Bailouts" and feeling like they are bank rolling other countries' irresponsibility.

Thats my little snapshot of Europe anyway.

As for Japan, their economy has been stagnant for a good decade. Their current government are now printing loads of Yen to try and bump start their economy. They've not had any real growth in a long time now and are very indebted.

I just went to go look at Greece's debt, they're sitting at 500 billion.  I gotta ask, cause I'm missing a huge peice of the puzzle, but why is the U.S. allowed to sit at 11 trillion dollars of debt but Greece is at bankruptcy and needs a bailout?  Or even here in Canada, we've accumulated that much debt, but we don't need a bailout.  I'm honestly asking this cause these numbers don't make sense to me, is there some magic accounting magic at work here?

There are a few factors.

A big one is, the US has it's own currency, and can use the central bank to print money on demand as needed. Greece have no control over the value of their currency as they use the Euro, this has been most of the European countries which are in difficulty's problem. They can't devalue their currency to help boost exports and manufacturing because although this would be right for their economies, it would be wrong for other countries using their Euro.

It effectively leaves them very limited as to what they can do to boost their competitivity on the global market.

Another is the US is a much much bigger economy than Greece's. Although the US debt is massively higher so is US GDP. Greece's debt is significantly higher than it's GDP, whereas the US's isn't, it's current roughly the same.

The reason Greece's debt has become so unmanageable though, is that because lenders are less and less satisfied with their ability to repay their debts, the interest rates they are having to pay when rolling that debt over in new bond sales etc is increasing, meaning it's costing them more and more to service their debt. The US (along with the UK/Germany etc) still enjoys very low interest rates, in the UK's case, the interest rate paid on it's debt is currently at a record low.

A lot of it is purely "speculation" of lenders beliefs in a country's ability to repay their debts. Countries like Italy and Spain which are on the borderline of concern the interest rates are pretty fluctuant at the moment as investors gain, then lose confidence in their ability to repay their debts.

In Greece's case, it got to the point where the country couldn't raise enough money to reservice their existing debt and a default would have been inevitible without the bail out. The US however is able to service it's debts, and is able to raise new funds to roll over it's debt at the moment without any problems and so is currently no where near as likely to default on any of it's repayments to any creditors.

Hope that makes a bit of sense :)