But the lack of size is actually part of the problem. While the U.S. is able to borrow and spend its way out of the worst recession in a generation, the little PIGI’S won’t be allowed to even try such a maneuver. Put simply, the rest of the world won’t let them as was evidenced by Portugal’s auction this week.
The key take away from the situation is these countries are at risk from a financial standpoint. And since the markets did a very poor job of assessing risk prior to 2007, traders are making a point to get it right this time. Thus, any country that has too much debt is going to have a very hard time going back to the well and borrowing more.
Since the EU is not willing to bail out any of its members; Greece’s answer to their debt troubles is to enter into an austerity program. And while this sounds like the responsible thing to do, from a big picture standpoint, the country is effectively prescribing an extended recession/depression to cure their debt ills.
But let’s get back to the question posed in the title. As long as nothing bad happens anywhere around the world (think 9/11) and the economies of the world continue to grow at a healthy rate, we probably don’t need to worry too much about the PIGI’S turning into a huge problem. However, based on the less than robust recovery that is projected in most of the developed nations, it might be a good idea to keep the debt mess in the back of your mind. And should things start to deteriorate on the economic front, then we would probably need to worry a lot – and about more countries than these little PIGI’S.
Want an executive summary of the really important market-moving headlines?
Don’t Miss TSP Newest Weekly Reports:
-
Click Here to Sign Up For the ETF Leaders Report
-
Click Here to Sign Up For the ETF Big Money Flow Report
- Click Here to Sign Up For TSP Stock in the Spotlight Report
S&P 500 Last 3 Months -
S&P 500 Last 12 Months
S&P 500 Last 5 Years
The way the rest of the world could control the outrageous spending in DC is through US treasuries-like just quit buying the overrated junk debt. Congress can raise the debt limit all they want but it means nothing if they cannot finance the debt. I wonder if the Federal Reserve(central bank) has come to the conclusion that they can only buy so many treasuries before the buck becomes nothing but butt wiping paper. What really gets me is the outrageous bonus of the investment banks-this is not productive in the sense of the productivity of a factory unless this money is going back into business world as capital investment which I seriously doubt-actually it just creates more inflation(maybe not if they are putting in overseas bank accounts never to be seen again or into gold). How close is China and others that hold massive amount of treasuries telling our government what to do-apparently they are not there yet because we are still fighting stupid foreign wars and wasting money on ineffective social programs instead of investing in the creation of cheap energy which would solve many problems. The situation we have is no better than the PIGIs.