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Will Greece default? Will Portugal, Italy, Spain and other nations fall like dominoes if Greece does? Does it matter? And how about the United States? We don’t really risk default, do we?I talked to a man who should know: Mohamed El-Erian, the CEO of PIMCO, the world’s biggest bond trader. He’s also written a superb book called When Markets Collide. Here’s a transcript of our conversation from Sunday.Ugg espadrilles women shoes Fareed Zakaria: For a long time, the Europeans have tried to find some way that they could kick the can down the road, that they could provide some kind of assistance because I think they fear a Lehman-like event where if Greece falls, it causes a kind of shock to the markets? Is it inevitable that Greece will default? Mohamed El-Erian: It is inevitable that Greece would have to restructure its debt. And you’re absolutely right. Europe has been kicking the can down the road treating Greek’s problem not as a solvency issue but as a liquidity problem.

I don’t like the analogy of kicking the can down the road. I prefer a better one, Fareed. Think of rolling a snowball down a hill. Two things happen when you do that. First, the snowball – or in this case the problem – gets bigger. And secondly, the dynamics start accelerating and becoming more disorderly. And that’s exactly what’s happening in Greece.Greece has two problems. It has too much debt and it cannot grow.Ugg espadrilles women shoes And until these problems are solved, more and more of Europe is going to be contaminated. We had a massive bailout a year ago in Greece – massive. A year later, every single indicator in Greece is worse off.A substantial part of that reason, is that it has had to adopt policies of austerity. Cutting spending, raising taxes, and that when you do it in a fragile economy, of course, you’re taking money out of the economy. The government isn’t spending on all the things it used to; it’s firing people rather than hiring people; all that has a downward spiral effect on demand and the economy.

Does that mean in the U.S. as we think about these issues of should we have another stimulus, should we start cutting the budget – is the lesson that while the U.S. economy is fragile,Ugg espadrilles women shoes don’t cut budgets substantially? The United States is fundamentally different from Greece in a number of respects. First, it has a lot more time. Because the U.S. supplies the global public goods. It supplies the dollar as a reserve currency. It supplies the deepest markets, financial markets, which means that other countries are willing to outsource the savings. This gives the U.S. much more time to deal with its fiscal policy issues.The second issue is that the U.S. actually is a much more vibrant economy. The problems facing the U.S. are not an engineering issue as much as a political issue.You need political will – you need the Democrats and the Republicans to come together to deal with four structural impediments – and they should be able to do that over time.