“Let me assure you the U.S. will always pay its debt. How do I know that? If you borrow money from the United States you get a piece of paper, a bond. And what does the paper say? We promise to pay, say a thousand dollars. How do I know the United States could always pay that? Because they just print those dollars. You know, you can imagine a temporary shortage of electricity and the printing press didn’t work but apart from that it is inconceivable that we would not… we promise to pay you these little pieces of paper, you were foolish enough to accept that promise, and we will deliver those pieces of paper. But Greece can’t deliver those pieces of paper. When it borrowed in drachma it could deliver those pieces of paper called drachma. But now it promises to pay in euros and it doesn’t control the printing of the euros. That’s done from Frankfurt. And so they can’t get access to those euros. So in essence the euro created the potential for sovereign debt crises in Europe. A problem that had not been there before.”
– Joseph Stiglitz, The Future of Europe, UBS International Center of Economics in Society, University of Zurich, Basel, January 27, 2014
“The way the eurozone was created created the risk of a sovereign debt crisis. Because it meant that each individual country was borrowing in a currency that it didn’t control. It was a borrowing, in a sense, like a foreign currency. United States will never have a sovereign debt crisis. We owe a lot of money. Actually, relative to our GDP more than Europe. […] But why would the United States with all its debt never have a debt crisis? Because we promised to pay people in dollars. And we control the printing press of dollars. Some of the rating agencies don’t fully understand this and I’ve tried to explain it to them. The only way we would not pay back our debt is if we had an electricity blackout for an extended period of time, something happened to our printing presses that we couldn’t print dollars. But that’s hard to believe that we couldn’t solve that problem. So, the fact is that we will never have the kind of sovereign debt crisis that has plagued so many countries of Europe.
We all should have understood sovereign debt crises because the emerging markets and developing countries… that has been a fact of life… dozens of sovereign debt crises over the last thirty years since the era of liberalization began in 1980. More countries have had a crisis than have not had a crisis. And the point is they are inevitable consequence of borrowing in a currency that you don’t control. But the currency [euro] is controlled from Frankfurt and the borrowing is done in individual countries. So, that is one of the things that was not, I think, fully appreciated at the time.”
– Joseph Stiglitz http://bit.ly/1qs6De0 (mp3) @ 01:45:11 http://bit.ly/1lhxZ14 http://bit.ly/1fYTRz3
“Yes, I do think [the United Kingdom and the United States] deserve to keep their AAA rating. The likelihood of a default is so small and particularly in the United States because all we do is print money to pay it back. To me the notion of default is so absurd is that it is another reflection of the absurdity, the irrationality of the financial markets.”
– Joseph Stiglitz http://bit.ly/181OUw0
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