America Needs to Wake Up to Financial Realities

Talks between U.S. President Obama and the Republican-controlled Congress on the debt limit have broken down yet again. Their complicated negotiations are not intrinsically an issue that would obstruct the world’s public affairs. Yet this time around, party politics are closely related to the U.S. Treasury bonds that other countries, who nowquestion whether America can make payments on time, have bought. In other words, if the two parties continue to fight, other countries are the ones who will suffer.

Even though analysts believe that Obama and Congress will definitely reach an agreement in the end, it’s incredible that they would use their own sovereign credit as a political football. What’s more, they dare to make hostages of all the countries who have bought U.S. treasury bonds, including China, Japan, and Germany. This points out how out of balance the world is!

The U.S. often considers itself to be the world leader, and it does take the international lead in many areas. As America is a nation-state, as well as a leader, it is very difficult for it to avoid using its leadership privileges to line its pockets. For example, is is obviously true that even if America makes its loan payments on time, it has countless ways to dilute its debt. America prints its own money, and the rest of us have to earn it — it is impossible to explain how that is fair.

America is a country with fully developed democratic ideals and democratic practices. Crucially, one of the most basic elements of democracy is the creation of checks and balances. In today’s world, America is basically unable to provide checks and balances, as its GDP and technological capabilities are far ahead all other countries. Furthermore, America’s national defense spending outranks all other nations; its annual defense spending budget is larger than the next 15 countries combined. America could be reasonable if it wanted to be, but instead it is using its capital and being unreasonable. Whether or not America is reasonable depends on the method that provides the most benefits.

This is the largest truth that today’s world has no choice but to recognize. America needs money and it is going all over the place to borrow it. If it can’t borrow money, it prints money. Other countries either keep reserves of U.S. dollars, which are lent to America, or buy even more treasury bonds. In other cases, they collectively accept the freshly printed money. These two losses are actually the same. As the saying goes, the bag is heavy whether you carry it on your back or in your arms.

America is not trying to be a rogue country; consequently, it has set an upper limit on the amount of national debt it can have. But the problem is, when it has no other choices, it can still be a rogue country. Interestingly, America has already infected the entire world with this disease. It seems that many countries hope that America will increase its debt limit and use newly borrowed money to pay for its current debt. Constantly borrowing money supports the U.S. dollar’s credit. If the dollar were to suddenly collapse, it would be as if a small asteroid had crashed into America’s, then Europe’s and finally Asia’s financial markets.

America’s privileges must subject themselves to more and more limitations. This requires America’s becoming more self-aware. However, more importantly, it requires every country in the world’s taking stand against America’s power. The selfishness of the U.S. dollar’s being a sovereign currency is not, essentially, compatible with its role in internationalism. When the American economy is prosperous, this contradiction is not apparent. Yet as the American economy faces more and more problems, the possibility of the U.S. dollar’s serving U.S. interests is clear. It is just like a shared apartment filled with wooden doors and wooden furniture while America chops the furniture into firewood piece by piece.

If America’s relative decline is real, then the ultimate decline of America’s financial hegemony characterized by a core U.S. currency is unavoidable. This process should be gradual; no one wants it to happen overnight. But this is not something that should be prevented by all possible means, because America’s power is part of the world’s composite forces. As long as America’s power is not too great, then it is unable to supersede world trends and distort them.

Gradually ending the special privileges of the U.S. dollar might be a new opportunity for America to rejuvenate itself. America is gifted with innovative ability as well as the diligence and bravery of its immigrant culture, so it does not need to rely on exploiting relatively poorer countries in order to succeed. It is precisely the special privileges of the U.S. dollar that have turned Americans into lazy people. Wall Street used to be the center of energy where people could recharge; now it is a cacophonous casino and a school for thieves. When unreasonable things rely on power alone, they are not sustainable. America needs a rude awakening.