United States National Debt
United States National Debt
The Unite States economy experiences considerable shakeups since the economic crisis of 2008 that led to bursting of significant economic bubbles such as the housing bubble. This has left the government with inadequate funds for its expenditure, and hence turning to debt finance. The considerable amount of government after the economic crisis is the highest in the Unite States over the last three decades. This has had substantial ramifications and implications for United States citizens; the high government borrowing translates into remarkably low amount of funds left in the hands of citizens hence making goods and services extremely expensive for the United States Citizens.
Immediacy in policy formulation towards correction of this situation in order to improve the standards of living for United States citizens is inevitable, Jaffe (2011). Despite the situation for the United States government, it enjoys a higher economic status than other countries. First of all, it has its own currency despite most other countries; this leaves it with the mandate of making paramount decisions about its currency, for example, it can decide on its monetary and fiscal policies independently to regulate the value of its currency. Possession of own currency also gives the country a political supremacy over other countries; The United States is not under the regulation of any trade bloc regarding issues relating to currency.
This is in comparison to the majority of countries in Europe which have a common currency, therefore, no country within the European market can affect the market tendencies using the currency, and this negates the countries’ Political strength derived from economic power. The United States has also a sole control over its currency. This is significantly beneficial to the country because it enjoys all the benefits that come in handy with the currency. If the currency is exclusively strong in the international front, it enjoys all the benefits that come with it; it has also the power to control prices of its currencies in dealings with other countries. With all these advantages that the Unites States enjoy, the United States can easily reduce its borrowing and use other avenues to generate revenue,Rose & Dickens (2012).
The United States enjoys considerable benefits in having its currency in comparison to other countries. The first outstanding benefit to the country is that, it has the prerogative of deciding policies regarding its currency domestically and hence make the necessary changes it wishes. For example, it can formulate the monetary and the fiscal policies without interference from any other state. Using a common currency essentially implies that there are common policies, which all the countries using the currency must adhere to, for favorable terms of trade to all members. The prerogative to formulate its own policies is an advantage to the country. For example, despite the economic upheavals facing the United States currently, it can easily reverse the situation by enforcing corrective monetary and fiscal policies.
For example, to correct the problem of currency unavailability to the citizens, it can decide on an expansionary fiscal policy, Rabin (2001). This can be through increasing the level of government expenditure and reducing the level of taxation, these are self corrective measures that are to the sole discretion of the government due to its currency independency. The central bank of the United States can also enforce necessary monetary policies to regulate the price of the dollar, which could be corrective measures on the deficits experienced by the government. Another advantage that accrues to the United States due to possession of its own currency is the political supremacy brought about by economic power. The United States does not share its currency with any other countries despite many countries in Europe.
There are benefits that the country reaps from this regarding it political supremacy. It has total change on decisions regarding the performance of its currency in dealings with trading partner or other cases using the currency. The United States dollar is the standard in the majority of transactions all over the world. For example, fee payments in many colleges across the world are through US dollars. This garners political supremacy for the country from the use of its currency in the world’s principal operations as a standard currency; the United States does not share currency with any other country, and all the political supremacy from the operations of its dollar goes solely to it; if it shared currency with another country, then there would be shared interests. The other advantage that the United States enjoys from the sole control of its currency is benefits that come with the operations of the dollar in the international front. For example, when the US dollar is performing exclusively in the international front, all the benefits go to the country.
For example, when the exchange markets favor the dollar, the exports of the United States fetch high prices and hence, and hence it enjoys alone. In contrast to countries which share currency such as the European Union, the benefits are spread over several countries. If the Euro is performing exclusively in the exchange markets, exports from countries which use the currency fetch high prices; this is not beneficial to one sole country as there is sharing of the currency by multiple users. Although revenues from exports go up, countries not enjoy the level of benefits that the United States enjoys because competition arises. A country, whose quality of exports is relatively lower, will not enjoy many benefits despite the favorable price of the Euro, own currency, therefore, benefits the US. It has also the prerogative to decide the price of its currency as it wishes, Gordon (2004).
The United States has considerable opportunities to reduce its debt spending; therefore, it is expected that I will not be a long time before the country reduces its borrowing rate and turns to other revenue sources. The evidence to this, in the first place, is the strength of the US dollar in the United States. This indicates that the United States has a potential, favorable market for its exports. Enforcing better terms of trade with its trading partners could see it garner considerable revenues from exports, and; therefore, reduce its debt with the banks.
Depending too much on borrowing by the government, places the value of a currency under threat, the United states should, therefore, take mitigating measures with immediacy to reduce its over dependency on borrowing funds by focusing on other means for generating revenues for government expenditures. Taxation is one of the avenues the government could use to cut down the level of borrowing, the US government should take corrective measures immediately before the situation replicates into an economic crisis.
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