There is an ongoing debate over US leadership about fiscal policies. One side wishes to rein in spending while the other prefers to spend more. The U.S debts are growing year after year. Over the last five decades, there had been only six years when the United States had a balanced budget. As we speak, the U.S has an $80 trillion debt of unfunded liabilities and over $15 more of other liabilities. It is feared that in the next fifteen years the unfunded liabilities may double up. Right now, the U.S debt is greater than any other country’s. Surprisingly, even when the bonds of European Union are combined the US debt will still be enormous. If the rate of deficits continues to increase with the current rate, there are many reasons why the US economyshould collapse in the next ten years.
World’s Reserve Currency
The U.S manages to get away with huge debts because it is the world’s reserve currency. Holding such a status gives the U.S certain privileges. Frist, the worldwide economic markets price their goods in U.S. Dollar. This means that all countries selling and buying currency must trade in the U.S currency. Consequently,the demand and value of the US dollar increases tremendously.However, The U.S should be cautious about the high business class of their currency. According to economic experts, the U.S. is facing more and larger challenges, the gravest challenge being from China. China is working hard to ensure they replace the US dollar with their own. This problem threatened more after China established more than 30 currency swap deals using their money rather than the US dollar.
The US Fed has suggested a clear green signal on the economy of the US. The US dollar has hardened as a reflection of better economic performance. The Fed did not change their interest rates, which are still held at zero. Despite that, it has shown readiness to implement exit policy that will cut excess liquidity pumped into the US economy; hence turning inflammatory. The possibility of an exit system has boosted the sentiments towards the US dollar, and many investors have started to show interest again. According to the Fed, the US labor market is headed for greater performance. US Fed notes that, raising the conditions of employment will significantly improve the economy of the US since it is a consumer-driven economy.
Understanding Christian Broda
Christian Broda graduated from the University of San Andrea with a degree in economics. From there, he pursued his masters and PhD in the same field. Currently, Broda plies trade with Capital Management Company and is actively involved in numerous hedge funds. He is widely known for his informative articles published through Quarterly Journal and American Economic Review.