Attempts at austerity and deleveraging in Europe have converted an economic problem into a political dilemma, with leftist governments rising against Germany's austerity-laced rescue packages. Germany now faces a tough economic decision that will involve choosing between a breakup of the current euro system and a movement toward a common fiscal policy in Europe.

Many people, observing the severe problems caused by Greece and other financially weak members of the European Union, wonder why the United States is not similarly afflicted. After all, the structures seem quite similar; the EU is united through a treaty into a single political grouping, while the U.S. is a union of states in a constitutional system. 

Despite frequent, dire warnings about the unsustainability of government budget deficits in the United States, Europe and Japan, investors are lining up to lend to some governments at very low interest rates.

A system that lets participants choose between the traditional system and a lower-cost settlement paid in inflation-adjusted Treasuries could ensure the program's solvency.

Twenty-first century economists blithely talked of the "risk-free debt" of governments, and European bank regulators set a zero-capital requirement on the debt of their governments. The manifold proof of their error is that banks and other investors are now taking huge credit losses on their Greek government bonds. The only question is why anybody would be surprised by this.

AEI Resident fellow Alex Pollock examines past sovereign debt crises, especially the European crisis of the 1920s, in the context of the current economic situation for a piece in the latest Financial Services Outlook and the Wall Street Journal.

Ambassador Bolton's review of John Fonte's book "Sovereignty vs. Submissions:  Will Americans Rule Themselves of be Ruled by Others?"

The United States overtly defaulted on its obligations in the 1930s, when the U.S. government refused to pay its gold bonds in gold, in violation of its clear promise to do so.