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Sovereign Debt Scares - Is The U.S. Immune?

Editor's note: This article was originally published on February 8, 2015 by James Hamilton here .

Many people are finally coming to a realization that should have been evident long ago: Greece's debts are not going to be repaid. And as discussion turns to who might be next, it seems a good time to revisit the question of whether the United States could some day find itself in similar trouble. I am substantially more optimistic about this than I was a couple of years ago, and here is why.

Let me begin by clarifying that the difference is not, as many other observers have often asserted, the fact that the U.S. debt is denominated in our own currency and therefore could always be repaid just by printing a sufficient quantity of dollars. Reinhart and Rogoff (2009, pages 111-116) documented more than 70 separate historical instances of overt default on… Read More …