Great editorial in the FT from Niall Ferguson. He concludes with:
On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.
Ferguson notes how spiraling debt and deficits foster a loss of investor confidence- which pushes against the currency and forces inflation higher. In turn, rising interest rates divert more capital away from productive enterprise- at a time when economies are already overburdened with debt and struggling to recover. The US$ is benefiting at the moment because the problems originated in Europe. Ultimately, reality will confront the US, and that is what makes the end of QE or rate increases from the Fed such a pipe dream.