Hidden Confidence in US shown in Euro debts saga
Worries about the ability of the Portuguese, Spanish and Greek government’s ability to repay their debts sent Indexes around the world tumbling. Dow Jones Index went below the 10 000 mark for the first time in months.
The markets, as of now are reacting well to news that European government’s would be helping Greece out of her mayhem. So the fear is somewhat lifted, but the scars are there to be seen. Even the Chinese and the Indians were not spared regarding this.
One thing this shows us is the increased effects of globalization. When Dubai announce that they had debt trouble, the world reacted negatively. Now this. What is shocking is that if this were to happen 10 years ago, the world probably would not be bothered, bar the neighbors of the country in trouble. Trade has truly been interlinked. Some more than others.
Now, there is also some light in all this. Look, Greece, Spain, Portugal, Ukraine may be in debt, but they are small economically compared to that of our economy. Yet, when they are experiencing problems right now, the world is sweating.
So, if the debts of the US were really that bad, how do you think the world would react? There would be catastrophic market plunges and millions of people would lose their jobs. But is there the scare amongst foreign investors right now? No.
Why? Well for one, America is not alone. Even a country like India, who is experiencing huge economic boom, has got a worse public debt than the United States. And not only is she surviving, she is actually prospering. So it is a problem that is not unique to America.
Secondly, and more importantly, we have lowered our debt before. We have had years where there was actually a budget surplus. And the world is confident enough in us that we can do it again! Remember those (President) Clinton years?
Though it is a mammoth of a problem, we can still solve this problem. How? It is awfully simple without the details, but something that is very hard to carry out in politics. We have got to increase taxes AND cut spending. We cannot have one, which is what our 2 political parties are fighting for.
Maths do not lie, neither does history. If we are going to cut taxes like crazy the manner President Reagan and President George W Bush did, we are going to balloon our debts the manner the national debt ballooned in both their terms. If we allow spending to shoot up like it was during the last administration, we are in trouble.
What is sad is that President Obama is doing both to score political votes. He is cutting taxes for the middle class and small businesses. His budgets are very generous; though to be fair, it is not chopped up yet in the Senate. He is doing all this hoping to win elections.
I am going to preempt the notion of, “ If you want to pay higher taxes, you pay it. Leave me alone.” or “If you want to cut benefits, you lose yours, I do not want to lose mine.” To these people, I would like to state that if it is possible, nobody wants to pay ANY taxes and EVERYBODY would want a $1million handout from the government. But that cannot be done. It is not realistic. It is also not realistic that our debt is not going to blow up in our face if we do not increase taxes and cut spending.
Lastly, we got to solve problems that needed fixing years ago. We need to revamp our education system , solve our health care and social security headaches. These are also issues that are a ticking time bomb waiting to explode.
