We are all Greeks now. Or so it would seem if we are guided by the gyrations of share prices. Or if we believe that today’s Greece is tomorrow’s United States. After all, we are running Grecian-style deficits, our debt-to-GDP ratio is approaching the magic 90 percent mark that stifles growth and makes it more difficult to bring the budget deficit under control, and the effective U.S. tax rate on new corporate investment is estimated by economists Duanjie Chen and Jack Mintz of the University of Calgary in Canada to be almost twice an 80-nation average. With no room to raise taxes, and no political will to cut outlays, it is not unreasonable to worry that America might decide to print money to pay off its creditors, triggering inflation. At a minimum, the Greek tragedy has focused attention on America’s river of red ink, even though the parallels are far from exact.
Worse still, analysts have begun to explore the extent of U.S. exposure to Europe’s problems. The Bank for International Settlements says American banks hold more than $1 trillion in European debt, and J.P. Morgan’s economists estimate that the eurozone accounts for 14 percent of U.S. exports. The question now, and one that can’t be answered until the fog lifts over Athens and Brussels, and we have a better grasp on the eurozone’s policy response to its problems, is whether what is going on in Europe will roll out across the world just as the seemingly tiny problem of sub-prime mortgages engulfed the world economy.
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