Greece as part of the European Union is quite similar to any over-leveraged state within the US Union. After the American Revolution, US created a single currency, but left states to handle their own debts and economic culture. But like their Euro setup, the states could not reduce those debts through currency depreciation as they did during the colonial days.
They key distinction between the setup of US Union after the American Revolution and the setup of the Euro were past debts. After the America Revolution states, as a contributor to the war effort which benefited the nation, had past debts cleared. This was not the case in the formation of the Euro Zone. Past debts were converted to Euros. As Greece entered the Euro zone, not only did its debt burden appreciate as a result of the conversion but it also lost the ability to depreciate during a crisis.
As Greece is forced to pay in Euro, a currency it cannot print, the Real debt burden soars as the economy falters. Greece is remains between a rock and hard place because currency devaluation (the printing press option), unlike the US, is not an option.
Headline: Is the U.S. like Greece?
Deficit hawks often cite Greece's debt nightmare as a cautionary tale for the United States.
But is the United States really like Greece?
The differences between the countries, after all, give the United States some built-in advantages when it comes to managing its debt.
The U.S. economy? Gargantuan. Greece's economy? Tiny.
Source: money.cnn.com
