Increasing US debt ceiling is causing collapse across the world.
Take an example of how India’s Rupee trade settlement system is getting failed due to the rising US debt levels. The system was launched with the aim of trading in INR terms with countries such as Russia and China. It was thought that this system would establish India’s rupee dominance on the world stage. Unfortunately, the system is collapsing, and countries like Russia have decided to hold off until the situation improves. It is the fault of economics, specifically the increasing US debt, causing collapse across the world.
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Rising of US debt ceiling
The US debt ceiling and financial terrorism are causing countries to suffer, such as Argentina, where the inflation rate is around 100%.
There are two important announcements that have been made by Janet Yellen, the US Secretary of the treasury. The first is the redeeming of existing and suspending new investments of the Civil Services Retirement and Disability Fund and the Postal Service Retirement Health Benefit funds. The second announcement is that the Government Securities Investment Fund or G Fund will not be fully invested in.
The reason for these announcements are a result of the total public debt in the U.S. until 2022. There has been a massive spike in the U.S. debt volume that the entire U.S. has taken. Debt is not necessarily a bad thing as long as income is rising. However, in the U.S. case, the debt to GDP ratio is getting very convoluted. During the Great Depression era, the debt to GDP ratio was 36%, but by the time World War One hit, it had increased to 116%.
Impact of rising US debt ceiling on Global economy
The two questions that arise from this are to what extent can the U.S. take on debt, and what impact is it creating on other countries? The U.S. can take on an infinite amount of debt, as it has the reserve currency in the world. The dominance of the U.S. dollar in the world trade market puts the U.S. in a privileged position. Every time the U.S. government decides to print $1, that is $1 of debt it is giving to itself.
The downside to this is that other countries are impacted, and plans like the rupee trade settlement system are failing because of the rising debt. The debt is causing a problem for India, as it has not established the rupee’s dominance on the world stage as it had hoped. Overall, the increasing U.S. debt situation is causing collapse across the world, and it is the fault of economics rather than any particular political party or leader. By understanding the impact of rising US debt ceiling on the global economy, people can become more informed about the situation and make rational decisions about their finances.
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Demand for US dollar
If the world stops trusting the US, the entire financial system will collapse. Therefore, the US must be frugal, innovative and stretch every dollar spent. Politicians, however, are not known for their frugality, and they end up spending crazy amounts of money on unnecessary things.
The demand for the US dollar is increasing due to a weaker economy. This weaker economy is driving the demand for the US dollar up because people are opting to hold the US dollar instead of their local currencies in countries like Turkey, Argentina, and Lebanon. The US is exporting financial terrorism to the world, and the domino effect of the debt crisis will eventually hit the US.
Conclusion
Countries like India, Russia, and China are facing challenges in dealing with the unsustainable levels of debt. They could decrease the demand for the US dollar by refusing to trade in it, but this would be difficult as the US dollar accounts for 60% of the share of the global reserve currency.
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