Slow Motion Fast Forward

Speaking of his own bankruptcy Mark Twain said it proceeded “At first very slowly, and then very suddenly.”  These days we are watching as the specter of bankruptcy slowly spreads its shroud over entire nations, with the threat of sovereign defaults now looming large.  Greece is garnering most of the headlines but recent credit downgrades for Portugal and Spain emphasize the possibility of contagion spreading throughout the Euro-zone.  How is Greece trying to thwart disaster before matters begin to spin too rapidly out of control?  Their deal with the European Union and International Monetary Fund calls for an increase in taxes, cuts in benefits, and a slowing of government spending.  The situation may still be moving slowly but we can use their difficulties as a template for what is happening here.  Fast-forward to our own inevitable day of reckoning and listen to the echoes.  Fed Chairman Bernanke believes that the U.S. economy cannot grow its way out of troubles surrounding our current high deficit and that entitlement programs will need to be reformed.  In a recent report to Congress he said, “In the absence of further policy actions, the federal budget appears set to remain on an unsustainable path,” adding that government must ultimately make hard choices about modifying programs like Social Security, finding ways to restrain federal spending and even accepting that higher taxes will be necessary.