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Money and Main Street
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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
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