If I was in U.S. House Speaker John A. Boehner’s shoes I would have agreed to President Obama’s terms in raising the country’s debt ceiling.
Why? Well I think it’s because the proposals which Mr. Obama presented to Mr. Boehner were actually very good. They included, “over a trillion dollars in cuts to discretionary spending, both domestic and defense”, and even a whopping, “$650 billion in cuts to entitlement programs such as Social Security, Medicare and Medicaid.”
Unfortunately, I am not in Boehner’s shoes. The Ohio Republican, should I say went in balls deep, deciding to decline Mr. Obama’s offer for a debt settlement and shut down the idea of any future negotiations with Democrats on the issue.
So let’s speculate for a moment about what could happen if the U.S. went into default on its national debt? How would that affect the world, and more importantly Canada?
Well, self-evidently the first to get hit will be the U.S. stock markets and the American dollar. It wouldn’t be completely unimaginable to see China start selling of its foreign currency reserves full of American dollars. And if or when China does, so will the rest of the countries that hold significant amounts of the currency.
Second, investment in the U.S. through foreign companies will start to slow down significantly. A default will produce an irreparable loss of reputation and confidence in the American economy.
Third, with no way to pump new money in the system and with a severely devalued currency, job loss will skyrocket and unemployment rates will hit double digits; I’m predicting something in the +25% range.
Depression, recession, lower credit rating, increase in poverty and larger income gaps between the haves and the have not’s, is what I would consider an ironic end to the Great American Dream.
Or, of course, I could be dead wrong or I may be blowing things way out of proportion.
One thing is for sure though, with Americans’ current spending habits, America will adopt Greek-style damage control, austerity measures and all, only when hell freezes over.
So considering that the chance of seeing resurgence in frugality and penny-pinching from Americans is literally zero, we can confidently say that the golden era of U.S. economic dominance is finally over.
Or was it over back in 2007, when this whole mess got exacerbated by the world-wide financial meltdown, again originating in U.S. stock and housing markets. Who really knows for certain?
Unfortunately, however despite sometimes attempting to do the right thing, the G.O.P. in the U.S. will go down in history as being the party, in league with their extremist Tea Party brothers, that brought down the American dollar and ended the American dream in which so many generations of both Americans and immigrants believed in.
