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
America's most powerful cars A new 'horsepower war' has erupted among U.S. automakers and these are the most potent weapons in their arsenals. More
A sampling of beers being made with traditional Latin flavors A small but growing number of craft breweries are including passion fruit, Mexican cinnamon and other traditional Latin flavors. More
Bubble Trouble? 5 pricey stocks Talk of a stock market bubble is growing louder. These stocks are some of the priciest in the S&P 500. More

Special Offer
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.