This from Eichengreen:
Many Americans look at Europe’s financial crisis as something quite removed from their daily lives. But any assumptions that the same couldn’t play out in the United States itself are entirely misplaced, argues Barry Eichengreen, author of “Exorbitant Privilege.” Not only could it happen there, it could happen very quickly and rather dramatically, he writes.
Given low interest rates and the still-weak U.S. economy, it will be tempting for the U.S. government to continue running deficits and issuing additional debt. At some point, however, investors will recognize this behavior for the Ponzi scheme it is. They will then come to understand that the real alternatives to the conundrum facing the United States ultimately reduce themselves to measures to drive down the real value of the debt, presumably by inflating it away.
Would images like the one below have a bearing on the argument? Pay attention to the close company the US keeps. And where´s Japan? A “basket case”, completely outside the “realm of reality” with Gross Public Sector Financing needs of 58% of GDP!
The above is a major cost of giving up on monetary policy early in the game!