USA will bankrupt before Europe?

In the past three years, Americans have managed to convince us that the crisis is over, but not in Europe.

While Europe, with many troubles established the first elements of proficiency corresponding  with the globalized world and began to control its public debt, they do not want to admit that the weakness of American democracy enable to increase the level of spending and public revenues suddenly to fall at unprecedented level.

Situation that the next president will face, who ever that would be, will be daunting.

At first glance, all is well on the opposite side of the Atlantic Ocean: Silicon Valley continues to be the leading place in world creativity. New York is still the most fascinating city in the world. American film continues to inspire the world. US armed forces are still allocated worldwide and democracy and security depends on them. US independence is secured by new sources of energy. Wrapped in her own optimism, America believes that will only be enough for some time to borrow, expecting growth to come back and swallow the debt.

But debt is growing much faster than ever before in the history of the United States (more than a billion dollars each year), almost faster than any country in Europe, and in two years will exceed 80 percent of GDP, which is more than double the level in 2008.

To finance the debt, this year federal budget borrows $4 billion, and debt servicing exceeds the defense budget, social security and health care system.

It will work as long as the creditors agree. They are of two types: Federal Reserve (U.S. central bank) which continuously print money (to borrow the state and commercial banks), and the new forces that have become richer with increasing of energy prices and this way invest their redundancy - in order this country to look strong and secure, in order not to exist alternative investments and in order US to be used as a mercenary.

Bank of federal reserves now owns one-sixth of the public debt, which is the highest level in US history. National funds will begin to diversify their investments. Financing of the US debt will be harder.

Logically, this will soon cause a decrease of the value of the dollar, increasing interest, which in the end would be disastrous - rise in interest rate for only one percent will increase the debt servicing of $100 billion.

At that point, US will declare bankruptcy. Can no longer help the unemployed of total 17 percent, would not be able to feed the 50 million people who would not survive without public kitchens, will not be able to repair old bridges and roads. Will not be able to rebuild its education system, which is disastrous (except most prestigious universities, where currently foreign students are becoming majority) and may not be able to maintain its military force.

If there isn't any technological breakthrough, or war economy, the decline of American society will seek pittance. But no one in Europe will benefit from it ..

Posted in: Economy