During the past few years it has become more and more evident that the US is not doing too well when it comes to finances. The borrowing limit has been constantly raised and public spending constantly cut.
The most recent event concerning the United State’s increasingly fragile economy and its Dollar, occurred this Tuesday (11/2) when Congress yet again decided to raise the borrowing limit (http://www.bbc.co.uk/news/world-us-canada-26146667). Effectively pushing the inevitable hard choices that will have to be made at some point, to a later date.
It seems like decision makers in the US are weary of the thought of tackling the looming threat of domestic and international financial meltdown. Partly perhaps due to the uncertainty of the coming elections but also, as I believe due to the fact that there are no acceptable or suitable solutions which would fit the current global order. Hence the only remedy it seems is to inject more Fiat currency (i.e. currency which does not have any real tangible finite value to back it up) to stop the bleeding while praying to a higher power that this impending crisis will magically solve itself.
As it stands the United States “will run a budget deficit of about $514bn in its 2014 fiscal year”.
I cannot pretend to understand all the technicalities behind currencies and Government debts/borrowing etc.
So my questions are as follows; How long can the US keep on raising its borrowing limit? How long until it is not sustainable any longer? When will the effects of these actions be too high of a price to pay for the International community? When will other nations be required to take actions to secure their own economies and what would these measures be?
I just find it absolutely reckless and borderline foolish to be playing around with issues which have a global impact. “Treasury Secretary Jack Lew had estimated the US could use accounting measures to avoid default only until 27 February”. I mean if the US defaults that will mean that the Dollar will default , which in turn will have tremendous irreparable consequences to the rest of the world. We won’t be talking about a financial meltdown any more but more like a complete and utter financial collapse.
I may be overestimating the impact somewhat but according to many scholars and economists (for some info see: https://kamakawida.wordpress.com/2014/02/08/conspiracy-or-not/) the result of the Dollar defaulting would be a crises which would affect the majority of the human race. This is why it seems so banal that politicians and policy makers would toy with such a concept as possible financial default, by leaving it unresolved to the very last minute. Whilst “fixing” the issue which could metaphorically be compared to trying to fix a sinking ship at high seas by filing the leaks and holes with sand.