Debt-Ceiling Standoff Threatens America’s Global Leadership
Even talk of a U.S. default is bad for the world economy and America’s standing within itPolicymakers have not minced words when describing the consequences of a U.S. default. “As reckless as a government shutdown is, as many people as are being hurt by a government shutdown, an economic shutdown that results from default would be dramatically worse,” President Barack Obama said in a recent speech. “The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy,” warned IMF managing director Christine Lagarde. The U.S. Treasury was even blunter, predicting a default would spark another global financial crisis. “A default would be unprecedented and has the potential to be catastrophic,” it said in a recent report. “The negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.”
Just rhetoric? Not at all. In fact, these statements might be underestimating the consequences. Remember a couple of years ago the turmoil that resulted from fears that tiny Greece would default? Well, imagine the impact a default by the U.S. — an economy more than 66 times larger — would have. All of those Treasury bonds held around the world would quickly lose their value, wiping out a huge chunk of global wealth. The banks and funds that hold these bonds would take an instantaneous hit to their health, possibly destabilizing financial markets worldwide. The dollar would likely plummet in value as investors lose faith in U.S. assets. No wonder the world is getting nervous. An official in China, the world’s largest foreign holder of Treasuries (with almost $1.3 trillion of them) warned that “the clock is ticking” and pressed Washington to “ensure the safety of the Chinese investments.”
The cost to the U.S. would be greater than even this. A default would forever undermine global confidence in the ability and willingness of the U.S. to provide global economic leadership. That would hasten the decline of America’s status as the world’s “exceptional” nation. Policymakers and bankers around the world would be forced to look for other sources of economic stability. That would bolster the standing of China in global finance and commerce, and that of the dysfunctional euro. Even if Congress eventually raises the debt ceiling and avoids default, as many investors still believe, damage is being done. The mere fact that some senior politicians in Washington are willing to flirt with default over domestic political squabbles raises doubts around the world about America’s commitment to its global responsibilities and tarnishes the reputation of the U.S. as a global leader.
Read more: http://business.time.com/2013/10/08/debt-ceiling-standoff-threatens-americas-global-leadership/#ixzz2h7fCcHwd
This piece is included under the broad title of "world finance"....and does not begin to include the implications of a default on the United States' capacity to provide moral and political strength to their words, and to their influence on events in the many boiling hot-spots around the globe. Myopia, and political narcissism, not to mention a deeply funded political movement to buy the American government by rich tycoons like the Koch Brothers and others for their own purposes which include their unfettered pursuit of profits without regard to either their less advantaged fellow citizens or the environment of the planet, has taken over the public perception of Washington.
And, in the near and longer term future, such a perception could easily and justifiably erode the confidence that players like China and the EU have had in the U.S. without replacing that confidence in a different world leader.
This is not merely a matter of global finance; it is a matter of the stability of the world's political system, including the capacity of the United Nations to expect and demand the needed funding for its existence, the capacity of the World Bank and the International Monetary Fund to attempt to balance economic and thereby political crises around the globe, and the precarious yet currently valued grasp on stability that is anchored in the position of the United States' dollar, and her respected and earned voice on the world stage.
This political terrorists who are threatening to push the United States over the default cliff are motivated by many simplistic urges, among them:
- contempt for the president
- contempt for the Affordable Care Act
- contempt for the view of government as supporter of the weak and the dispossessed
- contempt for the growing underclass
- contempt for science and academic research
- contempt for moderation in the pursuit of their political agenda
- a conviction that God is on their side in this fight
- a conviction that Satan is a member of the Democratic Party as well as an significant advisor to the administration
- a conviction that the rest of the world, who do not agree with them, are misguided and dangerous
- an addiction to the kind of uber-affluence that has purchased their thoughts and their votes
- a zealot's pursuit of a apocalyptic vision of a new world in which they are masters, through the elimination of anyone they considered "deviant" and unwanted....
And falling into a trap of extremism willfully, and so eagerly is little short of blind hubris, for their short-term, personal gain, at the expense of everything the United States, for all of its blemishes, has worked so hard to build over two-plus centuries.
Read more: http://business.time.com/2013/10/08/debt-ceiling-standoff-threatens-americas-global-leadership/#ixzz2h7exK0PE