Central Banks are meant to be independent of the government. Their mandates are: (a) Acting as a lender of last resort to banks (b) Controlling inflation/deflation through monetary policy (c) (In some cases, like that of the Fed) ensure unemployment does not breach an "acceptable" level.
In almost no mandate, is it mentioned that the Central Bank has to monetize sovereign debt (T-Bills, Treasuries, Greek Debt, Spanish debt etc). The ECB isn't legally allowed to do so for very good reasons. Even the Fed doesn't do that - all its Treasury and MBS purchases are from the secondary market.
In fact, when the Spanish government directed $19B ECB funds to Bankia via injecting Spanish debt into the bank, it was a covert form of sovereign debt monetization - something the ECB objected to vehemently, but couldn't stop.
Even Germany could not pay its debt if investors demanded redemption at maturity
They always demand redemption at maturity - every single one - however, it occurs via a debt-rollover, ie issuing new debt to repay older debt.
What Europe needs is that the distortions in the balance-of-payments between countries should be fixed - the liabilities of the Eurozone aren't evenly distributed amongst countries with respect to their capability to service those liabilities (and that indeed is due to irresponsible fiscal behavior). Bu this can't be controlled by monetary policy alone - it requires closer fiscal integration (and agreeing upon things like retirement ages, pensions, insurance and a whole lot of other stuff).
Minor nit: I believe they adopted the current monetary system in anticipation of future political union. Which was not unreasonable, extrapolating from the Franco-German steel and coal pact forward to the subsequent treaty system that created the EU -- but it got stalled when they diverted into expansion (from 12-17 states to 25+) instead of consolidation in the late 90s/early 00s.
And they'd still have been okay, in the short term, if the entire global economy hadn't caught a head-cold in 2007/08.
Disclaimer: some of my current open source work is supported financially by the EU
From here, it looks like Germany is now slowly getting, through economic means, what they were prevented from getting through military means during the last two world wars. I mean, sure, this is a hell of a lot nicer than fighting a war of that magnitude; I'm very thankful that I've never been in a situation where another human was seriously trying to kill me (and I've never been in a situation where I needed to kill another human, which, from what I hear, can often be more stressful and mentally damaging than being in a situation where someone else is trying to kill you, assuming you survive.) but... it just seems weird to me that the European community would let Germany reunite, then that they would almost voluntarily place them at the head of the European government.
How do Europeans feel about this? I mean, is my view of "give me the courts and the money supply, let the rabble have the rest" just not shared by most Europeans?
Is there a fear in Europe that Germany is taking over? I certainly haven't seen any of that in media coverage; but I would guess there would be some reluctance to express such feelings out of fear of appearing nationalistic or racist. (Of course, I'm aware that Europe is big; I imagine people in France and Italy, for example, have rather different feelings towards German dominance.)
Quite the contrary, people in the European Union hope that Germany will bail out everybody. In my opinion this is unlikely and if I were a German citizen I would not agree to have myself and my family indebted because of the EU ... however I hope that they'll understand that together we are stronger.
The EU is already the biggest economy in the world and if it survives this crisis it will also be the strongest for years to come.
Actually that was my political economy 101 course credo I took in uni.
69% of surveyed Greeks strongly agree that Germany wants to build a Fourth Reich. Ref: http://www.vprc.gr/uplds/File/banners/Diagrammatic%20Present...
It's basically what I get from the media and stuff. You know.... whatever country you live in. They want to tell you that you are great, should be proud and only talk about other's problems. So usually it's best to watch foreign medias to get a good (or pessimistic) view on your country.
Actually. Sorry, if that sounds plain, but from my perspective the bigger fear is that the US or China are taking over.
Maybe it helps to see Europe more like the states, just still more decentralized. I never really thought about this. In fact this comparison comes from a now US citizen.
Of course Germany and France (as well as UK, but they don't really care too much about the EU anyway) are like two strong US states. There may be so rivalry, but with EU and stuff they have the same goals.
It isn't like people in US think that some state is going to take over, right?
And one doesn't really have to fear much, if it isn't by means of war.
I am not from France, so no idea, how exactly they feel, but you have to keep in mind that the "constitution" of the EU basically grants everyone very equal voting rights. In fact smaller countries would have gotten even more votes if they hadn't killed it off.
There also is no dictator, not even someone in sight. From a democratic point of view Europe's distribution of power is far more even that for example what you see in the US, especially with the recent laws. There is no single person in Europe that has as much privileges as the US president for example.
Lets pretend Germany would really take the lead and stuff making Europe one big Germany this wouldn't really harm anyone.
So that's why people here are more afraid of a state like the US, which invests way more money (and I speak about percentage) into military than every other nation and which also has a lot of power with IWF, world bank (which aren't even really governmental/democratic) and where they have pretty strong nationalism, etc.
Now, nobody really fears the US and stuff. Actually the opposite is partly true. They see how the US struggles with debts, old infrastructure, loosing power to China, etc.
What I want to say with all of this is that things like that are more likely to go on in people's heads.
And I know this sounded kinda bad, but I actually heard the "US is struggling with own problems and soon isn't a world power anymore. That's why they do war and tell others about how to do their economy" quite often lately. Just a few days ago they even showed on the news how all the infrastructure built in sixties makes problems in the US. I guess it was kinda exaggerated, but it sounded like it is a poor country. What I want to say with this is that countries are really, really complex. You can't really say general things about them, cause every time you try to you actually say something that's wrong.
So, maybe there are lots of people fearing Germany and I just don't see them. The only thing I can say is that whenever they show the heads of Germany and France they at least pretend to not have any problems with each other and they do it really well.
Even if that wasn't a clear answer I hope that helped a bit. Basically the only thing that people worry about currently are Greece, Spain and Italy. Maybe it even is too much. They'd be doing well, if there was no worry. They "just" have the problem of everyone worrying, so they don't get any loans, people pull their money from these countries and this creates troubles and it becomes a self-fulfilling prophecy.
To come back to the topic a bit. It's pretty much what all these rating agencies do. They say: This country may have troubles to pay back their debts, which causes them to have high interests and so it actually becomes true.
That made me chuckle. Yeah. France? My impression is that sometimes you are not so different from America as people think.
Oh yeah, speaking of nukes, last time I checked /everyone/ was stepping back from (civilian) nuclear power after the Japanese disaster. I know in the past France has been pretty dramatically pro-nuke; has this changed?
I'm very curious why debt should be repaid at all, care to explain?
(Note: I think one's own debt is different than the debt in an economic scale)
The entire monetary system is built off the idea of trading goods and services that are the products of human labor. Things like automated assembly lines are a precursor - when we had 3d printing, you remove all human factors in the creation of goods besides the raw resource acquisition, and sufficiently advanced printers can also decompose trash into reusable pieces so you don't even need raw materials any more besides power.
All our financial woes and economic malnourishment is the product of this system, beneath government welfare overspending the budget, it is why corporations post record profits while laying off thousands and why all that money goes to the top of the management. When the actual consumable and usable goods are not produced by people, the sale of individual units breaks down.
Look no further than media. Media is an upfront cost of creation, but reproduction is free. The current system is so broken because it tries to charge per unit as if unit production has an associated cost, where the cost is the funding, not the distribution. That problem only gets worse as we automate everything more and more (automated cars replace drivers, 3d printers replace small scale manufacturing...).
That leads to a big one. Automated mining and farming. Fully, with no human intervention, where you can set off a robot with some pre-programmed track of land to till or dig and it will extract all the resources from that area for you. Once that happens everything goes out the window, because a single point of sale unit of production (plus maintinance, which then gets ursurped by the singularity making machines improve themselves) where once one of these machines is available, resources are no longer scarce.
And then money breaks down. Because when human effort is no longer involved in the day to day operations of goods production, there is no continuous "cost" involved anymore, in the terms the Reddit thread describes, or how most people interpret goods and labor.
Crucially, and this is where the whole utopian post-scarcity dream falls apart, the cost of making movie B doesn't significantly depend on the cost of movie A. Because a movie isn't a "thing". Movie B is a different thing than movie A.
The economic problem here is fundamentally one of information and cooperation. As far as we know what we want we should share the cost of producing it (i.e. production should be of what is known to be wanted, and cooperation should be on shared goals). And where we do not know (e.g. the future) we should not prevent unpredicted gains from what has been produced (i.e. by charging for copies).
The practical problem is how to get information and how to promote cooperation -- this is where possible arrangements can vary. But the core theoretical structure is that our production should follow from information, and our consumption should not be hostage to lack of information -- this is what all arrangements should try to achieve.
We don't "need" to work more. The USA produces a substantial excess of food, even past the excessive eating habits causing the obesity epidemic, and we sell electricity to Canada and Mexico since we are completely self sufficient there as well. Almost all of our electrical infrastructure is 40+ years old, grossly outdated, but the initial costs are effectively gone. The cost of power is just the million year old dead plants to make it.
The problem is we have no social construct to distribute these non-scares resources in any way but through exchanges that treat them as scarce. And we still have farmers toiling in fields and operators of power plants that need to be compensated for their labors.
The system really evolved to combat Communism. The powers that be ran with the propaganda wars of the 60's and turned the USA hyper-consumer with tons of debt to combat Russia's ideology. Everyone jumped on board because socialism and the "other" were irrationally dubbed wrong and thus we must do the opposite.
Also, food is becoming more expensive faster as the reality that only 1% of our population produces the resources we need to survive and prosper sets in. Make that 2%, 1% to make food and power and 1% to maintain infrastructure (poorly) and keep a functioning supply chain in place.
The rest of us? Effectively useless, and where we should be trying to invest the largest fraction of unbounded intellectual freedom to innovate and create in history to get us some freakin starships and immortality and super AI, we squander it with an outdated economic model that has millions sitting at desks twiddling thumbs or manning store counters because they have no choice if they want to eat and have a bed.
In the end, the best things we can aspire to are just not profitable enough for the system in place, so we wallow with a population grossly underutilized.
A few months back I would have said the same thing. Then I watched this: http://en.wikipedia.org/wiki/The_Century_of_the_Self
It actually appeared to start post WWI, just the Cold War accelerated the effect.
The kind of mass consumption spawned from the US that has people sitting in front of their TVs 6 hours a day on average, obsessed with celebrity, eating fast food, getting fat, buying and hoarding tons of junk they hardly even use, being seriously in debt, working jobs they hate to keep the cycle going... stuff that is actually deleterious to physical and emotional health? No. And that documentary brings context to how this mess came about.
Just give it the first 15 minutes and find out how one man behind one public event changed the perception of women smoking forever:
"Bernays staged the 1929 Easter parade in New York City, showing models holding lit Lucky Strike cigarettes, or "Torches of Freedom". After the historical public event, women started lighting up more than ever before. It was through Bernays that women's smoking habits started to become socially acceptable."
http://en.wikipedia.org/wiki/Edward_Bernays
This same man, the double nephew of Sigmund Freud, also coined the term PR and got his start as a propagandist for the Wilson administration during WWI.
That's a good cognate to David Graeber's description of neoliberalism: a program of governance designed to bring down Communism and hail the glorious victory of Capitalism, no matter the actual economic consequences of doing so.
Ultimately, bonds, like much else, are priced by the market. A $1000 bond is only worth $1000 if the issuer does not go bankrupt before the bond matures. Therefore, the bonds are discounted by some amount that correlates with how high investors think the risk is that it will be paid back in full.
A concrete example: Spanish 10-year notes. At the start of the year, investors demanded about 5% interest to account for the risk that the Spanish government would not be able to repay its debts. This means that for the Spanish government to raise €1000, it has to pay investors €50 every six months. However, this week that rose to 7%, effectively increasing the amount of debt the Spanish government must take on to raise the same amount of money.
This effect can create a death spiral (as we saw with Greece) where skittishness in the market raises the cost of borrowing, which unnerves investors even more.
So there's no way for investors to force the government to pay back all the debt. However, they can make it impossible to raise more money in the future.
A US defective of $10T required 6% of the federal budget to service in fiscal year 2011. Currently, accrual of debt is outpacing both inflation, and increases in revenues.
This might still be fine _if_ the additional debt has a positive impact on GDP growth, but that's not entirely obvious. Japan has been in a similar situation for two decades. 25% of their national budget is used for servicing loans.
What is it that causes prices to change? Ultimately, prices in the real economy are changed by producers and vendors based on signals that they receive. The only signals that really matter in that regard are (a) cost of supply and labor, and (b) demand for their product.
So now we have all these trillions of US$ in as-good-as-money floating around, but they are essentially stationary wealth deposits, which is why we are not seeing inflation. What if this changes? This is where I believe most people become confused.
If the owners of those as-good-as-money treasuries suddenly decided that they'd rather own paper money as opposed to treasuries, then the US treasury would have to print the required paper money without there being any inflation at all. Instead of non-moving treasuries there would now be non-moving paper bills - there is no difference (except that treasuries pay a little bit of interest).
So clearly it cannot be the printing of paper that causes inflation.
However, if those people then decide to go on a spending spree, then it is quite possible that the additional demand drives prices up in the real economy. So it is the huge reservoir of wealth that, if it were suddenly released, could cause inflation.
If that's what you're worried about, then you have to think about ways to get rid of that wealth. Taxing the rich, perhaps?
This is very different from what InclinedPlane was talking about, namely paying back the debt by just printing money. And I'm not just talking theory here, but empirical observation, because this has already happened!
That's what QE is all about. The Fed creates a lot of money to buy treasuries, which is (from the perspective of the private sector) equivalent to printing money to pay back the debt. That hasn't caused inflation, and the reason for that is very simple. From the point of view of the private sector, exchanging treasuries for money is simply an asset swap. It minimally affects the yield curve, but that's it. The purchasing power of everybody stays the same, and therefore aggregate demand stays the same, hence no inflation.
Compare that to your scenario, in which the purchasing power of everybody is increased significantly, hence most likely aggregate demand would increase significantly, likely causing inflation. Very different scenarios with very different outcomes.
To sum it up: printing money is not inflationary. Spending can be inflationary, but then it doesn't matter who is doing the spending (imagine the richest 500 people in the US suddenly spending all their wealth - that would cause quite the spike in inflation!).
The problem is that new money was created to buy relatively worthless assets, increasing the money supply and decreasing the relative wealth of dollar holders to those that the fed bought "assets" from. Once the banks spend this money, the latent inflation occurs and prices increase, making everyone that had dollars poorer relative to those that received the fed bailout.
Perhaps to nitpick - as long as enough people don't believe their neighbors believe that their neighbors are looking down, things are fine. If I personally look down, it is doesn't matter.
10 years ago: 1 EUR = 0,95 USD
today: 1 EUR = 1,3 USD
As European I really like the 'Euro crisis'. I'd be pleased to get more of it.
PS: What media has written about the financial crises since 2008 is mostly nonsense. In fact, we have seen a deep media crisis. Media is not able any more to give a remotely adequate picture of reality (not limited to financial aspects of course).
(http://epp.eurostat.ec.europa.eu/statistics_explained/index....)
http://www.shadowstats.com/alternate_data/unemployment-chart...
The numbers in the EU are also manipulated, but not by such a wide margin. When Europeans talk about unemployment, the statistic they're using is equivalent to the broadest US U6.
Let's poke at it a bit. Does "long-term discouraged worker" mean that if someone works for a few years in their 20s, experiences some obstacles in pursing their preferred career, and decides stay-at-home parenting is more to their liking anyway, are they now permanently "unemployed?" How do we recognize the difference between a detached person who's taken up sculpting and a desperate person living at wit's end?
Do you count as a "long-term discouraged academic" if you once made strides toward pursuing an academic career but strayed into industry? Do we have an economic crisis in the professional sports sector because millions of aspirants are being trained but over 90% of them ultimately can't find jobs playing baseball?
There may be some value in exploring how we define employment, but categorically calling those stats "real" and other stats "manipulated" trips my tinfoil detector, especially since I never see actual economists referencing this data.
> 2001: US 4,8; Euro area 8,1
> 2011: US 8,9; Euro area 10,2
Now: 1 Eur = 1.25 USD
That looks a little different.
PS: There are valid reasons for treating bonds as cash equivalents, but M1, M2, M3, etc are simply different ways of looking at the money supply.
To me the eurocrisis seems primarily a US/UK media thing...
The US is in much worse shape than most are willing to admit or accept, but the US has the global reserve currency it gets to abuse. That changes the game dramatically for the US. If the Eurozone had properly integrated its system, they might have stood a better chance, as it would have been easier to inflate, issue Euro bonds, and buy a lot more time as the US is doing. The EU is half a properly integrated system.
However, you refer to the US Dollar vs the Euro, but then you pick one specific country on the bond yield. Why not pick Switzerland? They have negative yields.
How about the bond yields for Spain, France, Portugal, Italy? France is going to explode next, so we can throw them in as well.
But I agree with you on the source of the problem - socialism or uneconomic regulation. That is visible in the doing business rankings of the world bank (http://www.doingbusiness.org/rankings). Ireland(rank 10), France(29),Portugal(30) will hopefully be fine. Spain at 44 is troubling; I'm only really worried about Italy (87) and Greece (100).
However Portugal+Spain+Greece have voted in conservative governments, Italy has an interim economist technocrat government. There is the European Fiscal Compact (http://en.wikipedia.org/wiki/European_Fiscal_Compact). And Germany is pushing very hard for economic reforms in the bailout countries.
Overall it is just a problem with a few countries with bad governments/regulation, not a "Euro" problem and certainly not a European Union problem... And we seem to be taking more steps dealing with it then the US or UK with their problems!
I compared to the US$ because the import/export in USD or GBP is incredibly more significant than the few currencies the Euro has done badly against, like the Swiss Francs or Japanese Yen or Norwegian/Swedisch Krones etc...
Note that the socialist nordic countries have stellar economies.
I've noticed a lot of Americans blame the euro crisis on socialism which,is interesting since it doesn't seem to hold up to scrutiny. I'd be interested in hearing why this is. Is it the media, an American distrust of socialism or something else?
As you point out, the nordic countries show that perverse incentives don't necessarily follow from Socialism. And indeed, America has its own non-Socialist perverse incentives such as encouraging pollution by not enforcing payment of the environmental externalities.
But all things considered globally, more socialism does tend to imply more perverse incentives.
However you end your comment by an unfounded claim that more socialism tends to imply perverse incentives. The same could be claimed of capitalism (or probably any other ..ism), see the banking sector and American healthcare for good examples.
In the rather socialist Denmark (where I happen to be from) when you break a leg you go to the doctor to get it fixed for free, and then you call your employer and tell him you won't be working for the next week, but you'll receive your paycheck nonetheless. When you get a child you take 9 months off work with full pay so that your offspring can get a good introduction to life. When you're out of a job the state will take care of you indefinitely.
Despite of this denmark has a consistently strong economy, is one of the richest countries in the world, and has for many years been in the top three of both the happiest country and the least corrupt country in the world.
Is that the Flexicurity system? How does that work?
It's the modern "communism", without invoking the spirit of McCarthy.
* University of California, Berkeley
* University of Washington, Seattle
* University of Massachusetts, Amherst
* Texas A&M
* University of Wisconsin, Madison
Shall I go on?
I have used this analogy several times recently. Good to see it here.
http://www.youtube.com/watch?v=L6fhxL_Njyg
Paul Murphy and the Destroyers have another answer to the question, but localised to the original crash.
What I want to know is: does anyone rate the rating agencies? We now have a situation where some geezers in NY can issue a 'rating' on a whole country and cause that country extreme difficulty.
Why can't we think of eu members like states of a larger country?
http://www.reuters.com/article/2011/10/24/usa-states-debt-id...
Also, aren't a lot of individual US cities in trouble?
http://news.sky.com/home/world-news/article/16135233
Michael Lewis (author of The Big Short) in his latest book "Boomerang" takes a tour of the places involved in the ongoing financial crisis: Iceland, Greece, Ireland, Germany (as a "victim") and, last but not least, California and the city of Vallejo.
Iraq and Iran threatend to sell oil in €, for several reasons, they couldn't and didn't deliver, unfortunatly.
The BRICs countries establishing their own trading in other currencies than $. So this dominating role of the US will end long term.
I don't really understand why this is considered so important. Big deal, so oil is priced in dollars. Say I have some Euros and want to buy €100 worth of oil. I trade the €100 for $X, buy $X worth of oil 100 microseconds later, and now I have the €100 worth of oil I wanted. What difference did it make to me if $X was $0.01 or $10,000? I'm trying to buy oil, not currency.
I see.
Wow, that's broken.
And since the producer can only sell oil in $ they have no choice but to lend to you - so oil in $ and owning the $ machine gives you a certain advantage over having to actually export somethign to balance our payments
On the other hand, it is very obvious that the fact that the Chinese government is buying up treasuries is what prevents the USD from dropping versus the RMB. So China is effectively giving the US a whole bunch of real goods for free, by buying up those treasuries. This may be irrelevant from the financial perspective, but in real terms, this is a huge benefit for the US.
That said, the fact that China buys lots of USD doesn't have anything to do with the whole petro-dollar thing. It just so happens that their industry is geared towards exporting to the US, and it is not possible for them to restructure their industry quickly. So in a sense, the article is still correct on the whole petro-dollar front, but misleading in others.
I think the only way this could collapse Wile E. Coyote style was if the trade routes in the Atlantic and the Pacific developed a huge problem with highwaymen and the US military couldn't lock it down.
The thing is tho', you want other countries to accept seashells too, places where you have no political or military control. The way this happens is that those seashells can be exchanged for goods and services provided by your citizens, who need seashells anyway to pay their taxes, so might as well use them for everything else too. Therefore the value of a seashell on the currency market (i.e. outside your borders) is backed by the industrial power of your country.
So to sum up, a military backs a currency only in the sense that the military holds borders in which industry can operate safely - and not in the sense of military as ultimate debt collectors. At least, the Greeks better hope not.
Of course, weak countries must pay their debts (even when a military dictatorship racks up odious debt), which is a lever to force them to ruin their societies through austerity programs.
However, the US could push a button and 'print' $2 trillion tomorrow morning in a monster QE3, and then hand Japan and China each a trillion dollars and nearly pay them off completely. All it would do is probably push the dollar index back down into the mid 70's, where it was 9 to 12 months ago. The bigger problem would actually be confidence, such a move would freak everybody out. Instead the Fed prefers to gradually inflate the value of Chinese and Japanese debt holdings away (which is also why China has taken such a liking to gold).
Since the credit worthiness of a country ultimately depends on its ability to tax its citizens you will see a very different market response to the same debt level.
There also isn't a fixed pie. A software company can turn $1M in salaries into $10M in revenue. This isn't new debt, but new wealth.
What GP is saying is that if the owners of treasuries were unhappy with those treasuries and preferred holding on to cash, the government could just create that cash and nothing would change.
This would not change prices, since if the owners of treasuries just swapped those treasuries for cash, businesses would not see their demand increase, and nobody would have any reason to raise the prices they ask.
Printing money is not inflationary, but spending money can be.
Those 14 trillion USD in government debt is held in bonds precisely because those wealthy enough to own them do not want to spend them. So if, all of a sudden, the Fed prints a lot of dollar bills to pay the US debt, what this really means at an operational level is that they print those dollar bills to buy treasuries on the open market and/or buy directly from the government.
This simply means that the demand for treasuries increases, which drives up the price of treasuries, which is equivalent to driving down the interest rate on treasuries.
To sum it up: if the Fed does what you say, the interest rates will drop further closer to zero, but that's pretty much all that will happen.
Now if you think that decreasing interest rates can have secondary effects, then we can talk about those. But given that the interest rate is almost 0% already anyway, it seems unlikely that a small downward change would have a big economic impact.
Perhaps you're confusing paying back the debt with actual spending. Paying back the debt is simply an asset/liability swap that doesn't change anybody's wealth, and therefore cannot have inflationary effects. Actual spending is something else, and can be inflationary - though in the current economic climate, you could probably increase government spending significantly (by a trillion or so per year) without creating inflationary trouble.
QE is the Fed printing money; lots and lots of money. Around 2 trillion so far. And very little has changed.
Everyone would stop accepting $ since there was a risk that the government would print 20% next month. The value of the US $ would crash as other countries suddenly stopped accepting it or wanted much more of it to cover the risk - so the price of imports would rise.
The price of oil would soar (in $) or only be available from some markets if you paid in euro/gold.
As twisted as it is, the US has an interest in seeing the Euro destroyed. It would leave the dollar as the only standing potential global currency (until perhaps China unlocks their currency, but who knows when that would be). Then the US could abuse the dollar at a much greater scale, with fewer competing major currencies for money to escape to.
In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserve, not just paper money).
How is this system sustainable? How can any of this debt ever be repaid? Well, since everyone knows the government can print money, most people do not worry about the government being insolvent. A dollar T-Bill is as good as a dollar green bill, both are backed by the full faith and credit of the USG. If the government needs to, it can always print money to redeem mature treasury debt. Since no one worries about insolvency, most people would rather have treasury bills (or a deposit account or CD backed by TBills) because they pay interest. So the $14 trillion rolls over in perpetuity. In reality, $14 trillion is not really debt, since it is nonsensical to speak of debt that one owes oneself and can negate by printing paper. The $14 trillion is the money supply - T-Bills are just a dividend paying form of money.
However, the situation in Europe is much more sticky. Europe runs the same type of monetary system. There are tens of trillions in Euro denominated debt, but only $1.3 trillion in actual bonafide Euros. However - unlike with the dollar - the countries that created this debt do not have the power to create Euros. So as suddenly as markets lose confidence in the debt, it becomes impossible to roll over the debt and pay it off. There simply are not enough Euros in the world to pay off even a small amount of debt. Every single country in Europe would be insolvent if investors look down and lose confidence. Even Germany could not pay its debt if investors demanded redemption at maturity The European Union government could order the european central bank to print money to buy out the debt, but this creates all sorts of political conflict as it results in transferring real wealth from country A to country B.
So that's why Europe is stuck. It adopted a monetary system that works when the government controls the currency, and adopted it in a situation where governments cannot print money. No one in Europe has the brains or authority to actually refactor and re-architect the system, so they are just muddling around, following the path of least resistance and putting in stop-gap measures.
My own pet solution is on my blog: http://intellectual-detox.com/europes-crisis/ If anybody from the ECB reads Hacker News, I am available for hire as a consultant at the low, low fee of 1 ounce of gold an hour :-)