The world is obsessed with the problem of too much debt and the
threat it poses to the civilized world. Greece is very likely to
default on its debt, and so are Ireland and Portugal. Meanwhile,
the U.S. wrestles with its own burden of debt. Total outstanding
debt owed by the U.S. government to the public now stands at
$9.75 trillion, or about 64% of GDP. That’s the highest level of
federal debt relative to the economy since the early 1950s, when
the U.S. government was working off its huge debt (well over
100% of GDP) incurred while fighting WW II. If the federal
deficit continues at the current level of 9-10% of GDP, total
debt will exceed 70% of GDP one year from now, and eventually it
could exceed GDP. Does all this debt and its attendant problems
mean the economic outlook is inescapably bleak? Will PIIGS
defaults result in a collapse of the Eurozone banking system?
Will debt default contagion bring about another global
recession? Will debt defaults intensify lingering deflationary
pressures? The short ans