The International Monetary Fund has warned that spiralling government debt could create a new financial crisis. While Greece is at the epicentre of the debt imbroglio, the IMF has warned that the United States, Europe and Japan need to start cutting their debt now before there's another crisis.
The debt situation in the US is dire with Jim Chanos, the hedge fund manager who was the first to see that Enron was a disaster in the making, saying that US states and municipalities have accumulated a debt burden that rivals Greece. "The numbers just don't work. They really just are daunting, similar to Greece and some of the southern European countries,'' Chanos says.
Writing in the Financial Times, former deputy US Treasury secretary Roger Altman warns that US debt is much worse than people think and is likely to hit 90% of gross domestic product, unless there are drastic budget cuts and tax hikes. That of course will present problems for Obama heading into the 2012 election. But as Altman says, the alternative of not doing anything will be far worse.
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