It is time for Obama to put the brakes on the budget a little more firmly. The U.S. would not be the first empire to collapse under the burden of debt. However, America’s enemies must still be patient.
Debt paves the road leading to the graveyard of fallen empires. Spain’s dreams of a world empire ended with a series of bankruptcies in the 16th and 17th centuries. The British could no longer finance their empire after World War I, when interest payments ate up almost half of their government budget. Also, in its final years, when it faced falling oil prices, the Soviet Union lacked one thing above all: money. In The Ascent of Money, British historian Niall Ferguson details how the downfall of hegemonic powers most often begins with an explosion of debt. He also prophesies a similar fate for the United States if it does not get its finances under control.
Now Standard and Poor’s has also made the severity of the situation clear. The American rating agency downgraded the creditworthiness of the U.S. for the first time in the history of the country, lowering it from the best grade of AAA to AA+. The consequences are difficult to predict. However, if the other rating agencies follow suit (which they currently do not intend to), then the Americans will certainly have to pay higher interest rates; the bankers of JPMorgan Chase estimate $100 billion more per year. The United States will sink deeper and faster into the debt quicksand.
President Obama of the U.S. reacted indignantly to the downgrading. It would perhaps make more sense to take on the roots of the budget problem rather than flail and attack the bearer of bad news. The AA+ rating does not come as a surprise; Standard and Poor’s warned that this may happen if the government did not reduce the debt by $4 trillion. The savings package Congress agreed upon after months of haggling only provides for $2.1 trillion. That is too little.
The United States is already past the critical point. Comparative historical studies made by Kenneth Rogoff, former chief economist of the International Monetary Fund, show that it becomes really risky if the debt of a country rises to over 90 percent of its gross domestic product because economic growth then automatically slows down. Last week, the debt ratio of the United States climbed over the 100 percent mark. Only once have the Americans been in debt so deep: 1946. Back then, however, when World War II had just ended, it was considerably easier to lower expenditures than it is today.
The swan songs for the U.S. are nonetheless coming too soon. Its military advantage, potential for innovation and protectiveness of the dollar as a base currency are so great that the superpower still has a few more years’ worth of leeway. It is beneficial for the Americans that they, partly thanks to the strident tea party, have a more developed consciousness of debt than the Europeans. Obama and company, however, dare not play around for much longer. Otherwise, the U.S. empire and the liberal world order will one day land in the debt graveyard.
I am a small business capitalist, My association was with mortgage firms and people who use to pay over 3 million in tax per year.
They say this administration is clueless to help with only 7% of washington ever running a business in their life.
many have simply taken what money they have and closed their business waiting for opportunities to come back around.
many cannot operate at a 35% tax level and are looking at other countries with less tax. these decisions have only been made since Obama took office. all one has to do is read Obama’s books and know he and his czars are hostile to the structure of the so called free world.
we can also see the inability to honor the people’s cry for common sense a budget balance which is required by our Constitution.
Obama promised us change and we are getting it in the way of a socialist manifesto of the 1800.
these are the facts by way of our stocks. many believe this is by design form foreign influence.
this is when stupid gets rewarded.