This is because governments wish to survive. To do this, they need to spend enough money to prevent a “maelstrom” and civil uprisings. And if they don’t take in enough taxes to do this (both because they don’t want to raise taxes further and because a weaker economy means less overall tax income), they must “massage” their accounts by borrowing.
And covert borrowing (from banks, for example) is better than overt borrowing, since it enables governments to avoid criticism, at least until the day when the secret gets revealed and there’s a “run on the bank.”
Greece’s problems are indeed Germany’s problems. Germany’s problems are indeed the United States’ problems. And the United States’ problems are indeed the world’s problems. Analyzing who did what in the last 10 years is far less useful than discussing what, if anything, can be done in the next 10 years.
What is happening is a world-wide game of chicken. Everyone seems to be waiting to see who will flinch first. Someone is going to make a mistake.
And then we’ll have what Barry Eichengreen has called “the mother of all financial crises.” Even China will be affected by that one.
http://www.nytimes.com/2010/03/02/opinion/02iht-edwallerstein.html?scp=1&sq=wallerstein&st=Search
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I am posting the above, because I suspect (but don't know) what is emerging is a whole flank of opinion that the US is headed into another collapse. I'd like to hear what the list thinks.
CG