(Note: There are many articles of various kinds of "America is decaying", and some of the analysis is a statement of facts and logical self-consistency; however, some judgments may be biased (such as a series of articles by a "financial big V" who was recently arrested for illegal deposits). It just so happens that Mr. Pang Zhongjia and I co-authored "Why the United States" (published in 2012), which I co-authored 10 years ago, introduced the economy, science and technology, military, education, business, and people's livelihood in the United States, which seems to be outdated. Then from April 2nd, we will excerpt some of the content and share it with you... ）
A strong American facet: the "corporate republic" is full of dangers
5-2-6 Reflections on the Financial Tsunami – "Systemless Systems" are unsustainable
On October 11, 2008, the website of the New York Times published an article titled "A Less Superpower", pointing out that the core reason for the outbreak of the financial crisis in the United States was "debt", which overdrafted future resources but did not lay the foundation for future economic growth.
As The Nobel laureate economist Mundell speculated at the fall of the Bretton Woods system, global dollar reserves will grow astronomically in floating exchange rates, which will inevitably lead to a flood of world liquidity. This situation means that the United States can use its monetary privileges to levy seigniorage taxes on other countries, and at the same time, it also uses financial innovation to spread the risk to the world, so that the world pays for the CRISIS of the United States, and other countries can only passively accept it. In other words, without the backing of the dollar hegemonic monetary system, the dollar is the currency of the United States, and the financial crisis is only a problem of the United States, and it cannot become a problem of the world.
The euro, yen, and pound sterling can also be freely convertible, but their international payment capacity is far worse than the dollar, and it is impossible to overdraft the world like the United States, through the double deficit of capital account and trade project, maintain a huge deficit economy, and indulge greed and plague the world.
Due to the monetary hegemony of the US dollar, the United States has transformed from a manufacturing power to a financial center, and the globalization process has strengthened the hegemony of the US dollar, so that the United States can transfer the cost of domestic financial risks to the common sharing of all countries in the world; it has further encouraged the United States to relax supervision and strengthen financial innovation in order to seize the commanding heights of finance, but it has triggered a financial crisis due to the rapid expansion of finance. Systemic financial risks will eventually inevitably be transformed into fiscal risks, especially because of the problems accumulated over a long period of time, the scale and destructiveness of the financial crisis far exceed the general economic fluctuations.
The US subprime mortgage crisis has trapped investors in US real estate around the world. In particular, a large number of holders of junk bonds and toxic financial derivatives have been kidnapped to keep their holdings of US Bonds inactive.
The US financial system dominates the global financial market, and the US dollar is in fact the world currency that cannot be blocked, and it is the basic unit of world trade settlement, so the United States should be responsible for maintaining the credit of its US dollar system.
Unfortunately, the growth of the U.S. economy is overly dependent on consumer profligacy, as well as huge spending due to ineffective policies and missteps, resulting in a growing fiscal deficit. Since the current round of financial crisis, the continuous implementation of bailouts and quantitative easing policies has exacerbated the gap in fiscal imbalances.
The U.S. fiscal deficit is rising rapidly. In fiscal year 2008 (ending September 30), the federal deficit reached $455 billion (excluding "$700 billion in bailouts"); a record high since the 2004 federal deficit rose to $413 billion due to tax cuts and the Iraq War. The U.S. deficit was expected to be larger in the next fiscal year, likely exceeding a trillion dollars.
Sure enough, the U.S. deficit in fiscal year 2009 reached $1.42 trillion, more than all the national debt combined in the first two hundred years of statehood, more than the total indian economy, almost the total Canadian economy, and more than three times the previous fiscal year's $459 billion, equivalent to 10% of the year's gross domestic product.
Important reasons for the sharp increase in the deficit include: in October 2008, Congress passed the "Problem Asset Rescue Program", in February 2009, Congress introduced the "Recovery and Reinvestment Act", as well as the plan to bail out Fannie Mae and Freddie Mac; in addition, the continuation of George W. Bush's national tax cut policy of extraordinary scale, the expansion of military spending, and the inefficiency and high cost of the medical system have accumulated, and the growth rate of medical expenses in the past three decades has been higher than the growth rate of the US economy. According to the US Congressional Budget Office, even excluding the impact of economic fluctuations, the deficit rate in 2009 is still as high as 8.6%, which shows that the high US deficit has a deep reason behind the financial crisis.
Economists generally believe that fiscal deficits exceeding 5% of GDP are unsustainable and are bound to fall into a vicious divergence cycle and find it difficult to adjust themselves. Oba President Ma had earlier said it would cut the trillion-dollar deficit it inherited in half in fiscal 2013. Today, it is clear that this rhetoric can only be shelved.
On February 1, 2011, Obama submitted a $3.8 trillion budget to Congress for the current fiscal year. By the end of fiscal year 2010 on September 30, the U.S. fiscal deficit is forecast to reach a new high of $1.6 trillion, or more than 10 percent of gross domestic product.
Alan Meltze, a well-known economist in the United States and a professor of economics at Carnegie Mellon University, said that such a huge fiscal deficit is unsustainable, and if the United States cannot strictly enforce fiscal discipline and effectively reduce the scale of the deficit, the result will inevitably lead to a "dollar crisis", that is, the dollar will depreciate sharply, inflation will intensify, and the world economy may face a new impact. (To be continued)
Written in December 2011 on the Hudson River in New York
(Sijin Note: Except for the author, all articles are original by Sijin.) 【Disclaimer】This article only represents the personal exposition and views of the original author, and readers are kindly requested to judge for their own judgment. The content or data is for informational purposes only and does not constitute any specific investment advice, is not used for any commercial purpose, and is not responsible for its authenticity. Investors operate accordingly at their own risk. ）
