Greek default and the euro

The long-expected Greek default looks like it will soon be upon us.

Detlev Schlichter has another good article on the subject:

The idea that Greece would have to leave the euro does not make sense to me at all. I don’t see any reason for it. Greece should default – in fact, the Greeks should just stop paying on their debt, period – and the debt should be restructured. None of this has anything to do with the euro.

What if California defaulted on its debt, or Illinois? Mind you, these are hardly improbable scenarios. Would that mean these states had to leave the United States of America? Or that they would have to issue their own currency? Would you take out the dollars in your New York bank account because one of these states had just declared bankruptcy? As long as others accept your dollars or euros in exchange for goods and services it doesn’t matter how solvent the state is under whose jurisdiction the money was issued.