I found both of these government debt articles via Naked Capitalism. The first is a moderately alarmist piece on the US. The second is an even more alarmist piece on Greece.
US
The New York Times has a piece titled Wave of Debt Payments Facing U.S. Government. In it, you have the usual: the US is running a large deficit, much of it is short term, interest rates won’t be low forever, everyone is in debt, etc. The article does a reasonable job comparing the magnitude of the debt problem. A one percent interest change in our debt would cause a hike in interest payments roughly equal to the annual budget of the Departments of Energy and Education combined. The White House estimates an increased interest payment of $500 billion annually, a bit more than six times larger than that.
I think the White House is extremely pessimistic on the interest coming due, largely because the White House is extremely optimistic on our recovery prospects. It’s possible that the US will face a prolonged period of switching between anemic growth and small recessions. In that scenario, rates could stay low for a prolonged period.
It is worth pointing out that the actions of the Fed will probably have a more significant impact on interest rates than any economic recovery. The Fed is a huge unknown to me. I think they will hold the zero rate for at least the next year. That will help with the rollover of short term debt. Unfortunately, they’ll probably do a lot of other things, and the impact on longer term interest rates will be a crap shoot.
Greece
The Telegraph has a pessimistic article titled Greece tests the limit of sovereign debt as it grinds towards slump. I’m generally an advocate of reading Ambrose Evans-Pritchard, and this article doesn’t disappoint. While the US looks toward a future with many unpleasant scenarios, Greece is living one. Why? The article begins with this gem:
Euro membership blocks every plausible way out of the crisis, other than EU beggary. This is what happens when a facile political elite signs up to a currency union for reasons of prestige or to snatch windfall gains without understanding the terms of its Faustian contract.
Greece doesn’t have the tools at its disposal that the US has. I’m of a split mind on this. I don’t have a lot of faith that the US will use the tools it has effectively (in fact, some uses seem downright counterproductive). However, it’s a little comforting to know we could accidentally stumble on to a solution just by pulling enough levers. Greece has no levers to pull. Greece must face the music soon. The US is able to push a little pain off on future generations (ha ha).
