Photo: Lost Star
The fact that the notion of a US default is even being discussed at a time when interest on the debt is so ridiculously cheap is a good reminder of something: At their core, all of these fiscal crises are just political crises.The biggest risk to the US right now is not insolvency: just plain Democrats vs. Republicans.
It’s actually the same in Europe. The continent certainly has the means to ensure that none of its members default, but the challenge is political, whether it’s the rise of the True Finns or elections in Germany that make Angela Merkel hesitant to support a deal.
And it’s precisely because of this that Japan is not a big default risk despite its debt burden. It just doesn’t have the same political strife everyone else. Sure it has liberals and conservatives, but because it’s more homogeneous as a society, it’s just far less fractured, and not going to go in a tizzy over spending at a time when interest rates are rock bottom.
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