Posner's analysis of Greece and the US

Greece and the Euro-Becker

Gary Becker writes in an excellent post

I will discuss the following two crucial questions about Greece and the euro:

Should Greece have become part of the euro? No.

Should Greece leave the euro? Not now, but probably in the future.

Why We Can't Escape the Eurocrisis | Gerald P. O'Driscoll Jr. | Cato Institute: Commentary

The underlying dilemma is that governments have promised their citizens more social programs than can be financed with the tax revenue generated by the private sector. High tax rates choke off the economic growth needed to finance the promises. Economic activity gets driven into the underground economy, where it often escapes taxation.
Why We Can't Escape the Eurocrisis | Gerald P. O'Driscoll Jr. | Cato Institute: Commentary

Sovereign Debt Pressure

he European countries seem to be facing a road with no easy exit. One on side they are facing fiscal deficits. On other side they are already dealing with an important debt amount that can hardly be sustained, as the case of Greece is showing these days. On even another front, governments are facing strong opposition on part of their citizens, like the “indignados” in Spain, to not cut spending. Too high debt over one shoulder and fiscal deficit over the other, revenue cannot be easily increased and the citizens oppose to cut spending. Certainly not an easy dilemma to solve.

The United States, however, is not free from this problem either. The following chart from The Economist shows “what it would take governments to reduce gross debt to 60% of GDP by 2026.”

Tyler Cowen on Greece

WITHOUT outside help, Greece is probably insolvent right now. . . .

Well worth a read.

Liquidate When Near Default

The federal government has a debt nearing $14.3 trillion. It is running a deficit of over $1.3 trillion per year. Its cash flow situation is terrible. It is only a few years given current projections when interest on the debt alone will consume most of current revenues. When a business faces an analogous situation, it will liquidate assets to pay the debt, cut spending so as to at least be break-even, and then perhaps will default if these moves don't stem the tide. The U.S. government should do the same. Would this solve the problem? You can see in the figure nearby that the U.S. government a great deal of land, 30 percent of the land in the United States. Even at very conservative estimates, a sale of land could pay the debt. Suppose the average price of the land is $1000 per acre; there are 650 million acres owned by the government. This means that selling all land at $1,000 an acre would bring in $650 billion. That is only 1/20 of the debt. How can the debt be paid without either defaulting or defaulting via inflation?