How certain are we that the US financial system won't implode first? Will Greece default before America? How about Portugal which has just been rated as junk by Moody's? .
We live in peculiar times that a question like this even comes up. A default by the US government – even if it's temporary and "technical" – would devastate the global financial system. As US Treasury Secretary Timothy Geithner says, default is not an option and that's why the smart money says it won't happen. Commentators say Congress and the White House will come to an agreement in the eleventh hour but it's coming damn close. The scary part is that what's happening in America is also being played out in Europe. Their public finances that are out of control and their political systems are too dysfunctional to fix the problem
It's a point raised by Gideon Rachman in the Financial Times. Both Europe and America, he says, are in the same sinking boat. Both were driven by the dangerous and unsustainable boom in credit and both have polarized politics, whether it is the Tea Party in the US or the Dutch Freedom party or True Finns in Europe.
There is another similarity between the two: any solution will be short term. There will be more bailouts in Europe Similarly, the US will raise the debt ceiling, bank profits will continue to grow and the rest of the US economy will continue to struggle. And in five years from now, we will see a new financial crisis where the US government will step in and bail out the banks.
Both the US and Europe are on the same road to hell.
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