Some things just don't happen. At least, we can't picture them happening.
The federal government of the United States, for example, will never go bankrupt. It just won't - businesses go bankrupt. Governments of small, poor, third-world backwaters go bankrupt. But the US of A? Not a chance.
This is the prevailing wisdom, anyways. Certainly no respectable opinion leader will openly suggest the United States government is en route to the same fate that GM will likely experience in the next week or so. Luckily, I am not a respectable opinion leader, and am therefor free to pontificate irresponsibly at will.
So here goes: I think there is a non-trivial possibility of the United States government defaulting on its debt in the next 10-20 years. Here is an article by one respectable economist who shares my concern, and by my count, that makes two of us. Maybe we're nuts. I hope we're nuts. Unfortunately, I'm not convinced we are. Consider:
1) The US is currently saddled with massive and geometrically increasing levels of debt, public and private. American consumers and politicians alike seem to have trouble making the logical connection between how much they earn/tax and how much they spend.
2) Medicare, Social Security, stimulus packages, financial sector bailouts and foreign wars are all putting upward pressure on government spending
3) Americans do not like tax increases
1 + 2 + 3 = An almost absurdly irresponsible pattern of spending and consumption by what is (for now, at least) the most powerful nation on earth. Here's a quick visual from the fine gentlemen over at Marginal Revolution:
And another one courtesy of the fine gentlemen over at, uhh, google images:
Scary stuff, huh? I wonder what kind of Debt/GDP ratio we'd have to see for T-bills to hit a AA rating. .80? 1.00? All I know is, we sure as hell don't want to find out.
No matter what, one of three things is going to happen in the next decade:
1) The federal government will make massive and unprecedented spending cuts
2) The federal government will raise taxes up to and above European Welfare-State levels
3) Serious people will consider the possibility of the federal government defaulting on it's debts.
As I said, interesting times.