Greece Could Happen Here

Eli Lehrer in a recent post argued that a crisis similar to the one that Greece faces now is unlikely in America because the U.S. has strong fundamentals, much lower debt than Greece, Americans work hard, the Fed can manipulate the dollar and the U.S. government has more political legitimacy.

Of all the points the only one that works in favor of Lehrer’s argument is the ability of the U.S. to manipulate its currency. Being able to devalue the dollar gives America a more politically safe way of managing a debt crisis. Nevertheless such a tool might mitigate a crisis but might not be able to halt many of the negative consequences. Continue