Written by Michael Thervil
Everyone knows that the United States is the biggest holder of debt in the world. Outside of the debt crisis that is constantly looming over the head of the United States, it leads people all over the world to wonder if America could properly manage their debt. It seems that every 3 to 4 years in recent times there has been the threat of a government shutdown which results in America raising their “debt ceiling” at the very last minute. But the question remains: “how long does America have before it can’t raise their debt ceiling anymore and defaults on their loans”?
At this point the current debt that is owed by America is roughly 32 trillion dollars. However, many people in the know think that is a low estimate. According to the nay-sayers, when you consider all the black budget programs and military operations that have “unlimited funding” that number goes up even higher. If you’d like to see how much America's debt is piling up, visit usdebtclock.org. This is a website where you can view America's spending and deficits in real time.
Outside of America seeming to always narrowly miss defaulting on their debt every 3 to 4 years, it is important to know that there have been nearly 21 government shutdowns since the 1970’s. Many people will blame these occurrences on the fact that America switched from the gold standard to a fiat-based currency. While that sounds plausible, it may not be the sole reason as to why America finds itself averting a debt default every so often. No matter the cause, this has led America to have their credit rating downgraded by Fitch Ratings. Fitch Ratings is an internationally recognized credit reporting agency for global capital markets and nations.
As of less than 30 hours ago, America’s credit rating has dropped from “AA+” to “AAA”. According to Fitch Rating there are several reasons as to why the downgrading of America's credit worthiness has occurred. They are as followed:
Erosion of governance.
Rising general government deficits.
General government debt to rise.
Medium-term fiscal challenges unaddressed.
Fitch Ratings also stated that the reasons for this credit worthiness downgrading is because:
“of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general governmental debt burden, and the erosion of governance relative to “AA” and “AAA” rated peers over the last two decades that has manifested in repeated debt limit standoffs and last minute resolutions.”
What the world wants to know is: “can America pay its bills”? – the simple answer is maybe. We are saying this because if America stops pork belly spending, stops subsidizing other countries in the form of foreign aid to the tune of $51 billion and counting, start investing heavily in their manufacturing industries, stop building and maintaining military bases overseas, stop printing money out of thin air and back their currency by gold maybe then America could get a firm grip on managing their debt.
We would like to leave you with billionaire Warren Buffett's solution to end America's financial deficit.
“pass a law that says that any time there’s a deficit of more than 3 percent of GDP (gross domestic product), all sitting members of congress are ineligible for re-election. Now you've got incentives in the right place.”
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