Can entire countries actually go bankrupt?
Some already HAVE gone bankrupt! Just a few months ago, Greece literally went bankrupt and was bailed out by the richer nations in Europe. Then, it was Ireland's turn, and it too was bailed out by Europe's strongest countries.
Now, this same crisis is spreading to the United States. But I repeat: There's no country on earth rich enough to bail out America, even if they were willing to do so, which they aren't.
So what do government debt crises actually feel and look like?
Such crises cause national labor strikes like in Spain, Greece and Italy, and massive street protests like those happening all over Europe, including Ireland, Great Britain, and other countries -- even the firebombing of banks and government buildings -- along with demands that the government be replaced. In addition, these debt crises have also caused huge cutbacks in government spending, including massive reductions in retirement and medical benefits, unlike anything we've yet seen in America.
Some people say it can't happen here. And if you're among them, listen to David Walker, former US comptroller general and head of the US Government Accountability Office (GAO). Former comptroller Walker warns that Washington's debts could sink the economy -- and SOON! According to Mr. Walker, "The Greeks engaged in a variety of "creative accounting" practices, and there were a lot of big and bad surprises that caused Greece to erupt.
But Walker than reminds us that the US has been engaging in a lot of this same kind "creative accounting" for years, with regard to the Social Security trust funds.
"Now, we've got major "creative accounting" going on, with US government-sponsored entities Fannie Mae and Freddie Mac. We own a majority of them, but we're not consolidating them into our country's financial statements. We don't consolidate the Federal Reserve into America's financial statements either. Their accounting is separate from that of the country as a whole. They can create out of thin air hundreds of billions of dollars and add it either to their books or the books of their member banks, and it no way registers in the accounting of the federal government.
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