Greece sold $5B of bonds today, well subscribed but at 6.4%, more or less double what Germany is paying. There’s another $75 billion that needs refinancing this year, plus whatever deficit needs to be covered after the “austerity” measures. Greece has reached the end of its tether rope and the bond market is giving a firm jerk. The positive result is that politicians are finally being forced to curb their wanton spending habits. In case you were feeling any Schadenfreude over Greece, remember that the structural deficit-to-GDP ratio is actually higher in the U.S. (7.8%) and the U.K. (7.6%) than it is in Greece (6.1%) and Spain (5.8%) (per David Rosenberg). It is just that the UK and the US get more rope than Greece, because they can print more money, which Greece cannot, but they are basket cases none the less. “Green shoots” in the US are entirely the result of aggressive deficit spending by the government and money printing by the Fed, which between them are running up a massive debt. The only question is how long goes by before the the US and UK run out of rope. The lesson from Greece is that politicians cannot control their spending, particularly where public sector unions are corrupting them. Like in California. But ultimately the bond vigilantes do arrive.

The real problem is that, by that time, the economy has been destroyed by over-consumption and under-investment. Thomas Friedman puts out a lot of words, mostly boring, but this piece in the NYT hits the nail right on the head – the lost competitiveness of the US.

We are the United States of Deferred Maintenance. China is the People’s Republic of Deferred Gratification. They save, invest and build. We spend, borrow and patch.

And this contrast is playing out in the worst way — just slowly enough so the crisis never seems acute enough to take urgent action. But, eventually, infrastructure, education and innovation policies matter. Businesses prefer to invest with the Jetsons more than the Flintstones, which brings me to the subject of this column….

….Yet that same study also measured what they call ‘the rate of change in innovation capacity’ over the last decade — in effect, how much countries were doing to make themselves more innovative for the future. The study relied on 16 different metrics of human capital — I.T. infrastructure, economic performance and so on. On this scale, the U.S. ranked dead last out of the same 40 nations. … When you take a hard look at the things that make any country competitive. … we are slipping.

The competitiveness problem is not something that can be fixed quickly, it is probably more generational in nature. But so long as we persist in pressing the “easy button,” it just gets worse.