Will Greece implode? Will a Grexit cause the Euro to stutter and stumble? Europe has had several years to prepare for such an eventuality. German banks and the German government especially, have had to do a fair bit of stick waving as well as the occasional carrot dangling, seeing they’re up to their necks in Greek debt. The end game may finally be upon us and one hopes the Eurozone will avoid a serious meltdown, having had a few years to prepare for this slow-motion car crash. Whether one agrees with the austere spending cuts demanded by mostly northern members of the Union, the fact is that Greece paints an uncomfortable picture for America.

Yes, the USA owns its own printing press, but people or governments still have to hold the debt that results from years of deficit spending. How high is US government debt? One can argue net vs gross debt, given inter-governmental liabilities like the Social Security Administration’s trust fund, which is soon set to go into the red. The trust fund is not included in net debt definitions. But gross debt is still debt and has to be paid back eventually by taxing citizens and corporations. With gross debt as the statistical measure, the US has about 104% of it’s GDP mortgaged off as future obligations. Greece is now above 150%, but some projections warn that America is on the same statistical path when it comes to debt as Greece was about a decade or two ago.

And the ace up the sleeve of the Treasury Department is the US dollar’s standing as the reserve currency of the world. One has to remember, however, that this status did not magically appear one day as the result of some decree signed by central bankers around the world. Bretton Woods was important but the dollar became the reserve currency because savers around the world, whether individuals or companies or governments, recognized the inherent value of America’s currency. And this was so because America historically had it’s finances well under control, or was able to pay them back promptly when public debt grew rapidly as a result of wartime spending, for example. This is no longer the case. The best that can be hoped for is that entitlement spending – and that includes corporate giveaways and bank rescues – grow at a steady and predictable pace. To actually expect entitlement spending to fall on an absolute level is too radical and too financially prudent to be in the subset of possible policy options.

And the warnings about a Greek style debt debacle right in America may seem statistically distant. People don’t care about the issue do they? Guess what, voters do. And voters understand that a change in say, China’s sovereign wealth fund’s investment policy, would exert dramatic pressure on America’s finances. And the worst part of that is, it’s outside America’s control. Precisely because the US dollar is the world’s reserve currency, it depends on the faith of the world in America’s fiscal probity. And more than that, it requires that no other exogenous factors – like military conflict – undercut that good faith. The main argument against this happening is that all SWF’s are in the same boat and do not want to sink along with the dollar. That, as any investment fund manager will tell you, is a very dangerous foundation to rest your financial fate on. While not all, or even a majority, of voters would say the USA is bankrupt, they do worry about government dealing with it’s debts. Just like they worry, and deal, with their own personal debts. Policy wonks, please keep that in mind.