America Isn't Greece, But "The Wolf Could Be at Our Door Sooner Than We Think," Reinhart Says

Greek officials visited with President Barack Obama and Treasury Secretary Tim Geithner Tuesday afternoon. While not asking for a bailout, the Greek delegation warned that America can't afford to ignore the situation in Greece and, more broadly, the threat it poses to Europe's financial stability.

Greek officials, including Finance Minister George Papaconstantinou, emphasized new austerity measures and a 10-year bond issue last week, which calmed fears of a full-blown crisis -- at least for the time being. But Greece has about 20 billion euros worth of debt maturing in April and May; meanwhile, officials are bracing for more strikes and protests amid steep budget cuts.

"We're not out of the woods yet," says our guest Carmen Reinhart, economics professor at the University of Maryland and co-author of This Time Is Different.

Is America far behind? Greece's crisis has triggered cautionary tales about America's profligate deficit spending. But "it's not a fair comparison," Reinhart tells Aaron in the accompanying segment. Greek's crisis has been decades in the making and the U.S. government has no history of default, unlike Greece.

While it would be premature to raise interest rate and jeopardize a nascent recovery, Reinhart says now is the time for the Fed and Congress to draw out a clear, U.S. fiscal exit strategy. "The wolf could be at our door sooner than we think," she says, expressing more faith in the Fed's ability to navigate the exit vs. the politicians' will to make hard choices.

Still, U.S. policymakers (and Fed officials) may be too sanguine the dollar will remain the world's reserve currency, Reinhart adds. The assumption is that financial crises are good for the greenback, as was the case in the depth of the 2008 crisis and in late 2009-early 2010 amid concerns about Greece and Dubai. One failed Treasury auction and that trend could change in a hurry, she warns. 

Click on the video player to get Reinhart's take on the U.S. dollar, and to embed and share the video. 

Earlier: 

• "Speculators are like vultures" but don't blame them for the Greek crisis