Remember Grexit, the nickname for Greece’s multi-year financial meltdown in the mid-2010s? The crisis sparked global fears that the small nation might be forced to exit the European Union, captivating investors and governments alike.
Back then, Greece’s fiscal chaos—driven by government spending wildly outpacing tax revenue—dominated financial news, with outlets debating endlessly about the consequences of a potential EU exit.
Though Greece survived the crisis with external support and remains in the EU (albeit with shaky finances), the lessons of Grexit haven’t faded for Doug Kass, a columnist for The Street Pro. He now warns that the U.S. financial condition is deteriorating into a Greek-style scenario.
Kass’ concerns emerged after Congress passed what he called President Trump’s “beautiful tax bill,” which extends the 2017 tax cuts and adds new reductions without offsetting lost revenue.
A key red flag: Credit default swap (CDS) prices on U.S. government debt—essentially insurance against default—are nearing those of Greek debt. CDS functions like an insurance premium: investors get paid if the debtor defaults.
“Investors seem blissfully unconcerned, dancing like ‘Zorba the Greek,’ while the U.S. splurges recklessly,” wrote Kass, president of Seabreeze Partners Management.
Referencing the 1964 film about a carefree Greek laborer whose zest for life masks tragic consequences, he highlighted a stark reality: The tax bill could push U.S. debt-to-GDP to 220% by 2055, signaling what he sees as a “Republican ideological shift to the Democrats’ big-spending legacy.”
The warning comes as bond rating agencies lose faith in U.S. debt. Moody’s downgraded U.S. debt from Aaa to Aa1 on May 16, a move that contributed to the S&P 500’s 2.6% weekly drop.
Investors also fretted over President Trump’s tariff threats and criticism of Apple, which fell 7.6% in a week (though he later delayed 50% EU tariffs until July 9).
The CDS market now prices U.S. debt for potential further downgrades—possibly to BBB+, just above junk status. “The real solution is cutting expenses,” Kass argued, “but neither party is willing to take the hit.” As Greece’s crisis showed, ignoring fiscal red flags may lead to consequences no amount of optimism can mask.
