Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Money and Main Street
8 of 12
BACKNEXT
Government bankruptcy?
Government bankruptcy?
Sean Rice, 40, owns art gallery/event space Orange Cat Studios.
Question: "Can the government go bankrupt? Could what is happening in Iceland happen to us?" -- Sean Rice, Denver, Colo.

Expert: Michele Boldrin, professor of economics, Washington University in St. Louis

Answer: "It is possible, but not very likely. Countries don't go bankrupt normally. Their treasury department does.

It would happen the same way it happened in Argentina: The government would be unable to fulfill the agreements that they had made, they would stop making payments on their interest and they would default on their debt.

But the moon falling is about as likely as this happening.

Despite the problems, we are still a very rich country. We still have cars and other resources. We're not any dumber than we were before. We still have all those riches we had before.

Japan is still operating at a 190% debt of GDP, while we are approaching 80% to 85%. So by those standards we are doing well.

It is the view right now that we have to spend a large amount of money right away because the ship is sinking. The idea that there is some solution that can be seen in the next six months is dangerous, but we won't go bankrupt unless people begin to panic."

NEXT: Why wasn't TARP enough?
Last updated April 14 2009: 11:56 AM ET
More Galleries
A look at Sears through the years Now Sears has officially said its business has an uncertain future, here's a look at photographs that documents the store's rich history. More
Coolest hotel bars for business travelers in 2017 CNNMoney asked a high-end concierge service for routine business travelers what hotel bars they'd recommend in 4 major U.S. cities. Here are the best spots. More
Top credit cards for business travelers 2017 Just like a pair of pants, there's no 'one size fits all' when it comes to the best credit cards for travelers. More

Special Offer