US exceptionalism

There's a certain satisfaction in the U.S. media these days when they point out that the U.S. financial crisis has hit the entire world. But there's an important point missing here. The financial crisis exists because banks are holding securities that all of a sudden aren't worth anything. That problem is world-wide. But there are two other parts that are concentrated in the U.S. -- the crash in the housing market, which has made ordinary people much less wealthy, and a large amount of government debt. Even if some sort of massive restructuring of mortgages goes on, this problem will not go away, because people's net worth has been hit hard. For example, municipal tax bases are going to shrink. Given this underlying problem with the fundamentals, there is no reason to expect the U.S. economy to recover soon, or even to stay in sync with the rest of the world. We may be able to avoid a Depression caused by illiquidity, but maybe not one caused by massive debt. And we may have to go it alone.