Default clocks tick

Jack M. Mintz, Financial Post

As the debt default clock ticks away in the United States and Europe, markets are understandably nervous. The potential for another financial crunch in the next two years is certainly a non-zeroprobability event, even if the current U.S. and European efforts are likely successful at avoiding a sovereign default this summer.

The root of today's sorry state of public finances goes back to 2009, when industrialized governments wisely co-ordinated their fiscal and monetary policies to forestall a depression. The losses in the financial sector, beginning with the U.S. mortgage default, were largely transferred to the public sector, which sharply increased indebtedness.

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