Rising Global Debt In the 2014 Global Risks Report issued by the World Economic Forum, fiscal crises in key economies was ranked the number global risk of highest concern (Global Risks). Ever since the great financial crisis from 2007-2009, countries around the globe have experienced a large growth of indebtedness due to the continuing need for countries to borrow from surplus economies in order to supplement persistent account deficits. Particularly in the United States, foreign owners of government debt saw an increase in their holdings from $756 billion in 1999 to $3.3 trillion in 2008 (Oatley p.235). Such an increase in global debt is a definite cause for concern as there are indications that the amount of existing debt increases/decreases growth rates in a country’s economy (Reinhart and Rogoff 2010 pg. 2). As a result it is prudent that countries with high GDP to debt ratios must preemptively take the initiative and act to decrease the growing global debt in order to prevent future obstructions to economic growth. Therefore, I believe that countries experiencing such a large increase in public debt ought to enact policies that decrease national spending while raising taxes; these two methods working in tandem would serve to alleviate the problem of increasing global debt and help to stabilize existing deficits in the global economy. In order to properly discuss the rising global debt, we must first look at its origins and the reasons behind the growth of debt in the global economy. Beginning since the late 1970s, policies regarding financial markets and lending have been less and less restrictive. These policies allowed for the increase in the ability to borrow from foreign countries, especially when governments seek i... ... middle of paper ... ...rmen Reinhart and Kenneth Rogoff, ‘Too Much Debt Means the Economy Can’t Grow’, bloomberg.com, July 14, 2011. http://www.bloombergview.com/articles/2011-07-14/too- much-debt-means-economy-can-t-grow-commentary-by-reinhart-and-rogoff Carmen Reinhart and Kenneth Rogoff, Growth In A Time of Debt, National Bureau of Economic Research, Working Paper 15639, January 2010 Global Risks 2014 Ninth Edition, World Economic Forum, 2014 Oatley, Thomas. “International Political Economy 5th Edition”, Pearson Education, Inc. 2012. The Economist, “A Very Short History of the Crisis”. The Economist. Nov. 12, 2011. http://www.economist.com/node/21536871 U.S. Infographic. “U.S. National Debt”. 2011. http://www.whitehouse.gov/infographics/us- national-debt "World". CIA World Factbook. 10 April 2013. https://www.cia.gov/library/publications/the- world-factbook/geos/xx.html
This deficit has to do with having responsible leader who are willing to increase awareness and make beneficial changes in the nation. In my opinion, the federal debt is a serious threat to the US that must be politically address whenever possible. I believe that the candidates of the 2016 presidential election should make this issue one of the top priorities to discuss and to dictate a considerable amount of work to fix it. That is because the worse the federal debt is, the worse the future would be to the nation. Also, voters must be well educated about this issue in order to shape their decision in voting for the candidate that seems most powerful and confident about this problem. Solving this problem may be difficult and would take time and so much effort. Therefore, the changes and solution must be on both a national and individual levels as
The US has been in and out of debt countless times throughout history, going as far back as the Civil War. However, debt did not become a truly relevant problem until much later, in the 1980s (Budget Deficits). Up to that point, large budget deficits were generally only allowed during wartime, but this pattern ended after the Great Depression. Roosevelt’s New Deal meant that the government spent much more than it previously did, even after the economy improved (Budget De...
The national debt is usually a frightening topic citizens of any country, however, in the United States, twenty trillion dollars of national debt is one of the major fears of the economy. Along with this fear comes every politician claiming to be the person to lower this astronomical debt to ease concerns in the modern American economy. In Hamilton’s Blessing, John Steele Gordon tries to alleviate these concerns by showing a plethora of benefits and good the debt has been able to do throughout the history of the United States. The central premise of the book and the main guideline for John Steele Gordon’s thinking is that the debt was used to save the Union in the 1860’s, the American economy in the 1930’s, and the wellbeing of mankind during
Every few years, countries experience an economic decline which is commonly referred to as a recession. In recent years the U.S. has been faced with overcoming the most devastating global economic hardships since the Great Depression. This period “a period of declining GDP, accompanied by lower real income and higher unemployment” has been referred to as the Great Recession (McConnell, 2012 p.G-30). This paper will cover the issues which led to the recession, discuss the strategies taken by the Government and Federal Reserve to alleviate the crisis, and look at the future outlook of the U.S. economy. By examining the nation’s economic struggles during this time period (2007-2009), it will conclude that the current macroeconomic situation deals with unemployment, which is a direct result of the recession.
Between January 2008 and February 2010, employment fell by 8.8 million, the largest decline in American history. The 2008 Recession, which officially lasted from December 2007 to June 2009, began with the bursting of an 8 trillion dollar housing bubble. Job losses during the recession meant that family incomes dropped, poverty rose, and people all over the country were suffering. Things like this don’t just happen. Policy changes incorporated with the economy are often a major factor. In this case, all roads lead to one major problem: Deregulation. Deregulation originating from the Carter and Regan Administrations, combined with a decrease in consumer spending, and the subprime mortgage bubble all led up to the major recession of 2008.
As our deficits continue to rise, our government should focus on ways to increase revenue and reduce the national debt. According to the US Debt Clock, if the U.S economy were to suddenly crash, each citizen would owe $202,835. That is more than the average citizen were to makes in 4.4 years. In 2014, a wage survey concluded that the national average wage per citizen was $46,481.52 (Social Security). If the United States continues to ignore the debt that is lingering, the countries that we owe money to could cut us off from trade. If this were to occur, not only would it hurt our economy, but we may end up in another great depression. China, Japan and Brazil are just a few countries that the government is in debt to. Even though there are other areas of concern such as military, education, and social security that the government needs to allocate spend to, reducing the national debt is what our government officials should be their primary expenditure considering how large our debt has gotten to.
All but four countries in the world has external debt (“Country Comparison: Debt External”). Having a debt is almost as common as having a mortgage. Since its establishment, The United States has always been in debt (“Historical Debt Outstanding – Annual”). The US national debt has had five sharp increases previously in its history. The reasons include civil car and the two World W...
The Sovereign debt crisis in Europe spread mostly across eurozone periphery countries of the Mediterranean and Ireland right after the explosion of the housing bubble in the US, which lead to the subprime crisis. While there was a feeling that Europe would not be hit by the financial crisis, soon markets started to worry about the sustainability of eurozone countries’ debt. These worries were amplified by different factors depending on the country: for Greece it was their constantly growing debt, for Spain it was the burst of the housing market on which its economy was heavily dependant, and in Ireland it was both the burst of the real estate bubble and the global financial crisis. These three examples bring us already some hints about what were the principal causes of the Sovereign debt crisis in the Euro area. This essay will look at some of those causes in order to discuss later what possible measures should be undertaken.
The Web. 11 Mar. 2014. The 'Standard' of the 'Standard'. http://policydialogue.org/files/publications/The_Latin_American_Debt_Crisis_in_Historical_Perspective_Jos_Antonio_Ocampo.pdf>. Pastor, Manuel, Jr. "Latin America, the Debt Crisis, and the International Monetary Fund.
Historically, financial crises have been followed by a wave of governments defaulting on their debt obligations. The global economic history has experienced sovereign debt crisis such as in Latin America during the 80s, in Russia at the end of the 90s and in Argentina in the beginning of the 00s. The European debt crisis is the most significant of its kind that the economic world was seen started from 2010. Financial crises tend to lead to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt, pushing many governments into default. Greece is currently facing such a sovereign debt crisis and Europe’s most indebted country despite its surplus in the early 2000s. Greece accumulated high levels of debt during the decade before the crisis, when the capital markets were highly liquid. As the crisis has unfolded, and capital markets have become more illiquid, Greece may no longer be able to roll over its maturing debt obligations. Investment by both the private and the public sectors has ground to a halt. Public sector debt has increased substantially as the state had to rely on official assistance to payroll expenses, fiscal deficit and fund social payments.
The article titled “You Are What You Owe,” centers around the recent gridlock in Washington over the debt ceiling (Mallaby, 2011). The article explores what would have happened had the United States government not come to an agreement on the American debt ceiling. The article also relates the United States crisis to previous counties that have faced this crisis in the past (Mallaby, 2011). The article reports on the finance and economic conditions in 2011 in the United States during the debt crisis (Mallaby, 2011). The article also discusses the American credit and bond strength and government’s securities, as well as the United States federal debt (Mallaby, 2011). The Gross Domestic Product or GDP, for different countries is also discussed in this recent article (Mallaby, 2011). The United States foreign economic relationships are also explored in the article titled, “Yo...
IMF Staff Position Note. (2009, March 6). The Case for Global Fiscal Stimulus. Retrieved from http://www.imf.org/external/pubs/ft/spn/2009/spn0903.pdf
Velde,D.K (2008). The global financial crisis and developing countries. Available at: http://www.odi.org.uk/resources/download/2462.pdf (Accessed: 5th August 2010).
Mr. Bartlett ends his article by saying that we should stop worrying about debt and begin to focus more on Aggregated Demand. He then has one last quote from Bill Gross, “while our debt crises is real and promises to grow to Frankenstein proportions in future years, debt is not the disease – it is a symptom. Lack of aggregate demand or, to put it simply insufficient consumption and investment is the disease.”
Warwick J. McKibbin, and Andrew Stoeckel. “The Global Financial Crisis: Causes and Consequences.” Lowy Institute for International Policy 2.09 (2009): 1. PDF file.