Maybe you forget Grexit, the nickname given to Greece's multi-year financial crisis in the mid-2010s. It had many people, investors and governments worried the small nation would be forced to withdraw from the European Union.
It was a big deal at the time. Greece was a financial and economic mess because government spending was far greater tax revenue. It caused financial outlets to devote many, many column inches or many, many broadcast minutes debating what might happen if Greece was tossed from the European Union.
Solutions were found to keep Greece afloat, and the country, so far, hasn't been tossed from the EU, though its finances remain shaky.
The StreetPro columnist Doug Kass hasn't forgotten Grexit. And he's worried the financial condition of the United States is deteriorating into something resembling Greece.
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What prompted Kass' thinking came a day after Congress passed President Trump's "beautiful tax bill." The bill would extend Trump's 2017 tax cuts and add tax cuts but doing little to replace lost tax revenue.
The event that Kass saw was that the prices of credit default swaps on U.S. government debt (which pay off in event of a default) were nearing the prices now being charged on credit default swaps on Greece's debt.
Credit default swaps can be thought of as insurance, and you pay what is basically a premium for the protection. If the debtor defaults on the debt, he pays off the investor.
Dancing like 'Zorba the Greek'
Kass, president of Seabreeze Partners Management, thinks investors appear blissfully unconcerned with implications of the tax bill. "It appears investors are dancing like 'Zorba the Greek,' while the U.S. spends gluttonously," he wrote.
"Zorba the Greek" was Nikos Kazantzakis' 1940s novel and, later, a 1964 film about a Greek working man whose zest for life overshadows all else, often with tragic implications.
What shocks Kass: "The bill's debt impact — with a 220% debt-to-GDP ratio by 2055 — reflects the Republican party's ideological shift to the Democratic party's liberal big spending of the past."
Bond rating cut is a signal
The underlying assumption being that tax cuts will fuel economic growth and take care of the deficits.
Maybe not. The major bond-rating agencies no longer see U.S. debt as AAA rated. Moody's Investors Service downgraded U.S. debt on May 16 to Aaa to Aa1.