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USA As Seen By Europe: The Next Greece?

Tyler Durden's picture


By now everyone knows how Americans feel about America: one quarter of the population (the half of the less than half that voted) is convinced the US is plunging into a socialist void that would make the USSR proud, another quarter of the population is furious at the wealthy and demands that they be taxed up the wazoo because "they didn't build that" but certainly profited from it, and is demanding wealth and income redistribution, while the silent majority is quietly picking up whatever pieces it can, and batting down the hatches, seeing very well, beyond the fog of bias and subjectivity, the inevitable epic deleveraging disaster, followed by even more epic printing that is coming this way. But how does the rest of the world see the US, especially now that the fiscal cliff (and the much less discussed debt ceiling debate: why, we don't know - it was "merely" the debt ceiling that led to a 20% drop in 2011). Yesterday, German financial media Spiegel provided a glimpse into just how Europe, which is knee deep in it as well, sees America. The verdict: the next Greece.

From Spiegel:

The US has more in common with heavily indebted southern European countries than it might like to admit. And if the country doesn't reach agreement on deficit reduction measures soon, the similarities could become impossible to ignore. The fiscal cliff looms in the near future, and its not just the US that is under threat.

The US has finally voted and the dark visions of America's future broadcast on television screens across the country -- and most intensively in battleground states -- have come to an end. Supporters of both Barack Obama and Mitt Romney had developed doomsday scenarios for what would happen if their candidate's opponent were to win. Four more years of Obama, the ads warned, would result in pure socialism. A Romney presidency would see the middle and lower classes brutally exploited.

But following Obama's re-election, Americans are now facing a different, much more real horror scenario: In just a few weeks time, thousands of children could be denied vaccinations, federally funded school programs could screech to a halt, adults may be forced to forego HIV tests and subsidized housing vouchers would dry up. Even the work of air-traffic controllers, the FBI, border officials and the military could be drastically curtailed.

That and more is looming just over the horizon according to the White House if the country is allowed to plunge off the "fiscal cliff" at the beginning of next year. Coined by Federal Reserve head Ben Bernanke, it refers to the vast array of cuts and tax increases which will automatically go into effect if Republicans and Democrats can't agree on measures to slash the US budget deficit.


Plunging Growth

As good as an instantaneous halving of the budget deficit might sound, the landing after a plunge off the fiscal cliff would be a hard one. Were taxes to be ratcheted up at the same time as state programs were slashed, it would have an enormous effect on the economy. According to the Congressional Budget Office, 2013 growth would immediately drop by four percentage points, making a recession unavoidable. The number of unemployed would be two million higher than without the cuts.

It is an eventuality that doesn't just put fear into the hearts of Americans. In its annual report on the US, the International Monetary Fund (IMF) referred to the fiscal cliff as the largest risk currently facing America. Investors have already reportedly become more cautious in the face of the looming cuts. Should politicians not agree to a credible plan for reducing US debt, it could ultimately harm the credibility of the dollar as a reserve currency. More immediately, the IMF writes in its World Economic Outlook report published in October, the drastic cuts "would inflict large spillovers on major US trading partners." In other words, an already fragile Europe would become even weaker.

As such, Germany won't be the only country watching closely as US Congress struggles to reach an agreement in coming weeks. Should the US economy radically slow down next year, "it could in the current atmosphere of uncertainty result in a global loss of confidence that would lead to a collapse in investment worldwide," according to the annual report of top German economic advisors released on Wednesday. Nevertheless, the experts warn, simply postponing measures to address the debt and budget deficit problems "would also have long-term costs in the form of still higher sovereign debt."


The Greek Model?

What, then, is the solution? In the end, the US could arrive at a compromise similar to the one that appears to be forming for Greece: austerity measures combined with more time to achieve budget deficit reduction targets. The drastic cuts currently looming are essentially a kind of debt brake, but it is one with no flexibility built in whatsoever. The US economist Denis Flower proposed in an interview with SPIEGEL ONLINE that Washington should introduce a law mandating long-term debt reduction, but which allows higher deficits in times of crisis.

US politicians, no doubt, would not be fond of hearing their country compared to Greece. After all, the heavily indebted euro-zone country was used during the presidential campaign as a caricature for the horrors of European-style socialism. But their current finances are not dissimilar, with one difference being that the US can't count on outside help as the Greeks have received.

It remains to be seen how US politicians choose to approach the problem. Republicans, having defended their majority in the House of Representatives, could simply let the country plunge off the cliff in the hopes that it would be blamed on Obama. Or, on the other hand, their willingness to compromise may have been increased by virtue of losing the presidential election badly. Republican Speaker of the House John Boehner on Wednesday pledged to work closely with the White House as negotiations begin. He said that lawmakers won't be able to solve the country's problems overnight, but said that voters "gave us a mandate to work together to do the best thing for our country."

Greece's economic problems and the resulting austerity packages it has passed have plunged the country into five straight years of recession. Germany, Europe and the world are hoping that the same fate is not in store for the US.

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Fri, 11/09/2012 - 11:17 | 2964411 q99x2
q99x2's picture

Heaven forbid that the DHS would become the next neo-nazi party.

Fri, 11/09/2012 - 11:33 | 2964476 GetZeeGold
GetZeeGold's picture



Just waiting for the new uniforms....they are all set on bullets.

Fri, 11/09/2012 - 12:41 | 2964750 Bam_Man
Bam_Man's picture

The new uniforms are on order from Hugo Boss. They still had a bunch of them sitting in a warehouse outside Munich.

Fri, 11/09/2012 - 11:38 | 2964503 semperfi
semperfi's picture

along with the New Black Panther and labor union thugs

Fri, 11/09/2012 - 11:41 | 2964513 Gully Foyle
Gully Foyle's picture


Clowns to the left of me, Jokers to the right

Fri, 11/09/2012 - 11:49 | 2964544 GetZeeGold
GetZeeGold's picture


.....and teaming with bold useful idiots.

Fri, 11/09/2012 - 12:26 | 2964681 Seafarer57
Seafarer57's picture

...and I'm stuck in the middle with you.


Fri, 11/09/2012 - 11:44 | 2964509 redpill
redpill's picture

DHS? Pfft. Just wait until they move Frau Napolitano over to Attorney General. Waco will look like a baby shower in comparison.

Fri, 11/09/2012 - 11:49 | 2964545 semperfi
semperfi's picture

yep - an officer in The Kenyan Thug's Army

Fri, 11/09/2012 - 12:25 | 2964679 willwork4food
willwork4food's picture

Spot on.Eeegads I hate that bitch. There's something about Napolitano & Boehner that keeps me awake at nights.

Fri, 11/09/2012 - 11:44 | 2964524 Gully Foyle
Fri, 11/09/2012 - 11:18 | 2964412 PartysOver
PartysOver's picture

Well, no shit Sherlock

Fri, 11/09/2012 - 11:22 | 2964435 orangedrinkandchips
orangedrinkandchips's picture

that phrase never gets old....lol

Fri, 11/09/2012 - 11:45 | 2964528 Gully Foyle
Gully Foyle's picture


It fucking does if your name is Sherlock.

Fri, 11/09/2012 - 11:51 | 2964549 GetZeeGold
GetZeeGold's picture



Is you name Sherlock sparky?

Fri, 11/09/2012 - 11:53 | 2964560 Gully Foyle
Gully Foyle's picture


Dude, is Gay porn all you think about?

Fri, 11/09/2012 - 12:01 | 2964584 GetZeeGold
GetZeeGold's picture



I think about all kinds really. Besides according to the last election it's now totally legal.

Fri, 11/09/2012 - 11:26 | 2964453 insanelysane
insanelysane's picture

The prez is going to let us in on the solution at 1:05PM Eastern today.  Me thinks we will be joining the Eurozone so we can solve our problems by pooling all of our debt.  Then the Eurozone becomes "too big to fail."

Fri, 11/09/2012 - 11:35 | 2964474 Rainman
Rainman's picture

5 minutes after close on a Friday.... I expect a big green crap and tax turd will be tossed into the punchbowl.

Fri, 11/09/2012 - 11:37 | 2964493 Bawneee Fwank
Bawneee Fwank's picture

I bet 1:30 or 1:45...fucker is never on time

Fri, 11/09/2012 - 11:58 | 2964578 Svendblaaskaeg
Svendblaaskaeg's picture

Orville: Do you have a brother whose first name is Sherlock? 
Sigerson Holmes: I do not.
Orville: You do have a brother?
Sigerson Holmes: I do.
Orville: Might I inquire as to his first name?
Sigerson Holmes: "Sheer luck."

Fri, 11/09/2012 - 11:18 | 2964414 sickofthepunx
sickofthepunx's picture

does greece have the reserve currency?

does greece have $100 trillion in assets?


Fri, 11/09/2012 - 11:27 | 2964455 Rubicon
Rubicon's picture


Fri, 11/09/2012 - 11:37 | 2964501 Orly
Orly's picture

Where have you been and what gives you the right to talk sense?


Fri, 11/09/2012 - 11:45 | 2964530 101 years and c...
101 years and counting's picture

only REAL difference so far:  the US has a printer and Greece doesnt. 

Fri, 11/09/2012 - 13:57 | 2965039 carguym14
carguym14's picture

The other "real" difference?

Guns and ammo-it will not be pretty when the party starts.....

Fri, 11/09/2012 - 12:04 | 2964598 DosZap
DosZap's picture

LOL, this is rich, WE see them as the next GREECE.................they are in worse shape than  we are....................

Fri, 11/09/2012 - 12:18 | 2964641 larz
larz's picture

Hey sick of punx How long do think it will remain reserve currency at this rate (China etc)? do you even know how close that is to imploding? Did you also know those assets pale in comparison to liabilities? Are you underwater on a mcmansion bragging about what a palace it is? Did you borrow all your money from family and friends whom are all sick of lending to you and are beginning to ask for it back? blah frickin blah blah.

Fri, 11/09/2012 - 15:36 | 2965612 TMLutas
TMLutas's picture

Only one thing is going to save us and that is that nobody has figured out a reasonable departure destination for their cash. Individuals might bail in any direction but the big money can't move easily and rapidly into smaller markets without destabilizing their destination. All the big markets are in the same boat, filled with too many idiots. 

Fri, 11/09/2012 - 12:35 | 2964721 pashley1411
pashley1411's picture

So it all belongs to the government and the Obamites?

Fri, 11/09/2012 - 12:35 | 2964722 pashley1411
pashley1411's picture

So it all belongs to the government and the Obamites?

Fri, 11/09/2012 - 13:10 | 2964852 tsx500
tsx500's picture

No.  And No.  But , they don't have Obama.

Fri, 11/09/2012 - 11:20 | 2964419 LMAO
LMAO's picture

In the end, the US could arrive at a compromise similar to the one that appears to be forming for Greece: austerity measures combined with more time to achieve budget deficit reduction targets.

What budget?

Fri, 11/09/2012 - 11:29 | 2964451 buzzsaw99
buzzsaw99's picture

to continue the quote:


 ...The drastic cuts currently looming are essentially a kind of debt brake, but it is one with no flexibility built in whatsoever. The US economist Denis Flower proposed in an interview with SPIEGEL ONLINE that Washington should introduce a law mandating long-term debt reduction, but which allows higher deficits in times of crisis.


it will be a constant crisis from now on. anyone who has decent intelligence and is even halfway paying attention knows how this ends.

Fri, 11/09/2012 - 12:33 | 2964708 odatruf
odatruf's picture

How it will end?

Some say the world will end in fire,
Some say in ice.
From what I've tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.


~ The Poet, NH

Fri, 11/09/2012 - 13:05 | 2964836 Overfed
Overfed's picture

Fuuuuck. We've been in a crisis  for the better part of a decade.

Fri, 11/09/2012 - 12:31 | 2964701 odatruf
odatruf's picture

Further, what austerity?

Ah, they must mean that we not be allowed to continue the current obscene rate of spending plus inflation.

Fri, 11/09/2012 - 11:20 | 2964420 Lost Wages
Lost Wages's picture

I always wear plunge protection.

Fri, 11/09/2012 - 11:22 | 2964437 TeamDepends
TeamDepends's picture

Commence "going greek" jokes in 3 2 1...

Fri, 11/09/2012 - 11:35 | 2964482 Dr. Richard Head
Dr. Richard Head's picture

Americans have been taking it Greek-style for years.


It's an ass fucking joke for those not in the know.

Fri, 11/09/2012 - 11:36 | 2964488 JPM Hater001
JPM Hater001's picture

I'm heading for a random dungeon, anyone want to come?

Fri, 11/09/2012 - 11:20 | 2964422 WaEver
WaEver's picture

Back in the USSA

Fri, 11/09/2012 - 11:20 | 2964425 spastic_colon
spastic_colon's picture

yep...doesnt take much of a rally now post election for the "sell into" crowd to show up

Fri, 11/09/2012 - 11:22 | 2964433 Jason T
Jason T's picture

what? you mean the 10%+ GDP twin deficits Obama just inherited from Obama?

Fri, 11/09/2012 - 11:28 | 2964459 edifice
edifice's picture

He didn't build that. Oh, wait...

Fri, 11/09/2012 - 11:50 | 2964548 bobnoxy
bobnoxy's picture

You're right. Congress hasn't passed one of his budgets yet. That puts the blame on those clowns with ''the power of the purse'', or Congress. And since tax policy and spending starts with the Republican led House, well, there you go.

Fri, 11/09/2012 - 12:26 | 2964683 divide_by_zero
divide_by_zero's picture

The Republicans have passed budgets, it's just that Harry Reid will not even bring them to the floor , the Senate hasn't passed one in 3 1/2 years. When they brought a couple of Obama's to the floor they failed by a 97-0 and 99-0 vote(http://thehill.com/blogs/floor-action/senate/227857-senate-rejects-obama-budget-in-99-0-vote)! The reason is the $850 billion stimulus got cooked into the baseline, they don't want to risk that coming out in reconciliation or even being brough up in public at all. So the continuing resolution rolls on with supplemental funding.

Fri, 11/09/2012 - 13:02 | 2964820 RSloane
RSloane's picture

Aren't you the one who didn't even know Obama signed NDAA, then after several posters pointed that out to you, you said Obama was forced to? Yes, I do believe you're the one.

Fri, 11/09/2012 - 13:07 | 2964844 Overfed
Overfed's picture

The Statist cum-guzzlers swear up and down that the Republicans made O'bomb-a sign NDAA 2012. Dumbfucks.

Fri, 11/09/2012 - 11:22 | 2964434 geewhiz190
geewhiz190's picture

asinine piece

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