"Forget the PIIGS; the U.S. is in worse shape."

There's been so much talk about the PIIGS--Portugal, Ireland, Italy, Greece and Spain--all of which (though Greece, primarily, in the recent past) have received special attention for being the weak links in the euro zone--potential sources of the collapse of the euro as a currency.

Really? asks Chuck Butler, president of EverBank's World Markets, in the lead story of the April Currency Capitalist newsletter.

You're afraid of Greece defaulting and causing the collapse of the euro? "It doesn’t make sense. Greece’s total contribution to the total Eurozone GDP is just 2%. If you remove 2% of the total Eurozone’s GDP, do you really think the EU will collapse? That’s like saying the U.S. GDP would collapse if Idaho left."

Add up all five of the PIIGs, and they account for just 14% of the total Eurozone GDP.

Here's what you and I ought really to be worrying about, Butler says: all the deadbeat states in the American federal union. "The list of deadbeat states includes the 'great states' of California, Michigan, New York, Massachusetts and even Obama’s territory, Illinois. Count up all these states’ debt and the 'hit' to the U.S. total GDP is more than 30%!"

Any one or all five of the PIIGS could leave the Eurozone--or be kicked out--and the hit to the states that remain would be relatively negligible.

But what can the United States of America do about any one--or all five--of the states that Butler mentions?

Absolutely nothing. "So the U.S. is saddled with these defaulted states’ deficits, whereas the Eurozone could very well say, good riddance to the PIIGS, and move on as a stronger entity!"

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I have heard plenty about California's economic problems. I assume Butler knows this. So in his article, he takes on Illinois. Just to make sure we are listening.

“The state is in utter crisis,” said Representative Suzie Bassi. “We are next to bankruptcy. We have a $13 billion hole in a $28 billion budget.”

“The state has been paying bills with unfunded vouchers since October. A fifth of buses have stopped. Libraries, owed $400 million, are closing one day a week. Schools are owed $725 million. Unable to pay teachers, they are preparing mass lay-offs. ‘It’s a catastrophe,’ said the Schools Superintendent.”

I was reminded of Butler's article because of something I just read about Los Angeles being bankrupt today . . . though, apparently, the city may be able to hide the full depth of its problems until May 5th.

See the full sad story here.