Is Greece the new American Standard?

(AP Photo/Haraz N. Ghanbari)

Published - Mar 10 2010 08:01PM EST
By TOM RAUM - Associated Press Writer

Treasury Secretary Timothy Geithner, right, talks with Greek Finance Minister George Papaconstantinou, Tuesday, March 9, 2010, in Washington.
WASHINGTON -- Greece is a financial basket case, begging for international help. Is America heading down that same road?

Many of the same risky financial practices that now imperil the Greeks were at the center of the all-too-recent U.S. meltdown. As with Greece, America's national debt has been growing by leaps and bounds over the past decade, to the point where it threatens to swamp overall economic output. And in the U.S., as in Greece, a large portion of that debt is owed to foreign investors.
Not good, if these debt holders begin to wonder if they'll be paid back. A foreign flight from U.S. Treasury securities could sow financial chaos in the United States, as happened when many investors lost faith in Greek bonds.
It's something that could affect all Americans. The U.S. has never defaulted on a debt, and even the hint of such a possibility could send interest rates soaring and choke off a fragile recovery. How long can the United States remain the world's largest economy as well as the world's largest debtor?
"Not indefinitely," suggests former Federal Reserve Chairman Alan Greenspan. "History tells us that great powers when they've gotten into very significant fiscal problems have ceased to be great powers."
After all, Spain dominated the 16th century world, France the 17th century and Great Britain much of the 18th and 19th before the United States rose to supremacy in the 20th century.
"Unless we do things dramatically different, including strengthening our investments in research and education, the 21st century will belong to China and India," suggests Norman Augustine, the former CEO of Lockheed Martin who chaired a 2009 bipartisan commission studying the nation's top challenges.
The Greek government has taken stiff austerity steps in an effort to get a lifeline from the European Union, sparking strikes and violent demonstrations.
Some of the same risky strategies used by U.S. hedge funds and other professional investors in a failed effort to profit from subprime mortgages in this country -- and which led to the 2008 financial near-collapse -- are now being employed by those betting that Greece will default on its debt.