Every minute, the US national debt increased by one million dollars. Recently, America's commitment once again exceeded its annual GDP, and in March 2018 years and did overstepped the mark in 21 trillion. And the more this amount, It becomes more alarming in the world.
Not a day without a fight
AT 1944 year, thanks to an agreement, prisoner in the resort of Bretton Vudc (USA, New Hampshire), replace the financial system, based on the "gold standard", system came, actually make the US dollar the world money. The United States undertook to convert dollars into gold at a fixed rate 35 dollars per troy ounce, and the central banks of all countries - to support the stability of national currency exchange rate against the US. So I was introduced dollar standard, which was based on the domination of US currency.
The Bretton Woods system initially worked properly. More than half the world's supply of gold – 574 million ounces - it is at the disposal of the United States, so that Washington's ability to perform its obligations is not questioned. A high demand for American products after the Second World War led to a high demand for dollars.
But by the mid-60s on the background of recovery in Europe and Japan, the situation began to change. Economic growth slowed in the United States, and inflation, conversely, accelerated. It has been a growing dissatisfaction with the member countries of the Bretton Woods agreement, because of rising prices in America, they were forced to increase the amount of its own money supply. This led to, that the country began to convert dollars into gold.
Washington, in its turn, I decided to abandon the connection between the main reserve currency and precious metals. AT 1971 the American president Richard Nixon introduced a temporary ban on the conversion of the dollar into gold at the official rate, which forced the country to agree to a revision of the quotations. After two years, the parties have established a floating exchange rate of their currencies against the dollar and later consolidated his Jamaican agreement 1976 of the year , which introduced the system of special drawing rights. So America has secured a move to release fiatnyh (from the Latin «fiat» -. Decree, indication, "let it be so"), that is unsecured money.
FROM 1960 , the maximum amount of debt of the United States, which is governed by the US Congress, almost unchanged 80 time, but only recently raising the debt limit has become a subject of political bargaining. Because of this, Washington almost every year have to face the threat of default.
In 2011, the American Ministry of Finance prepared to survive on cash balances and daily revenue, and the US for the first time lost the highest credit rating. AT 2013 the Government of the United States was forced to adjourn for two weeks due to lack of approved budget, which effectively meant a technical default. And in January of this year, the US Treasury once again had to ask Congress to urgently raise the debt limit.
Each battle between Democrats and Republicans in Congress on the country's obligations - unpredictable. The more this attracted the attention of the whole world.
A crisis 2008 He has shown, that the problems of the largest economy will automatically lead to the emergence of problems in countries all over the world. Many people are experiencing the consequences of the decline so far. At the same time, analysts believe S&P Global Ratings, "Unraised debt limit, likely, will have on the economy of more serious consequences, rather than the collapse of the bank Lehman Brothers in 2008 year ".
Stranglehold of debt
US government bonds, until recently, were considered the least risky financial asset is almost in the entire universe. The dollar's status as the global reserve currency allowed and yet allows Washington if necessary, increase the money supply in order to fulfill its obligations, so that other countries can always count on a guaranteed income. In addition, the US currency status, and the economy as a whole, provides liquidity treasuries (from English. «Treasury» - penalty, treasury) - Treasury securities.
As a result, states are willing to invest their money in the US economy. According to the latest data, most government bonds - at 1,18 trillion - belongs to China. Beijing, in fact, It is the main creditor of the United States. In second place - Japan (1,03 trillion). For her, but far behind - Brazil (300 billions), Ireland (299 billions) and the UK (274 billion).
All for about the share of foreign loans 30 percent of US debt - 6,21 trillion dollars. Such a huge sum makes investing countries dependent on the state of affairs in the United States, and especially - by default prospects.
Capitulation and loss of confidence
However, even aware of the danger of bankruptcy, experts are not able to confidently answer the question, what happens, if the US suddenly can not pay for its obligations. At first, because default, Most likely, It is not due to the objective state of the US economy, and political contradictions. And secondly, because at stake is the reliability of the dollar, which stores more 60 per cent of the world's gold and currency reserves, and the reliability of the largest economy in the world. If suddenly the world elite will put them into question, that arose as a result of panic on the scale can have fatal consequences.
However, in general terms, the consequences of default can be outlined now. Former US Treasury Secretary Timothy Geithner in a letter to Congress back in 2011 He was mentioned, that the disclaimer in the first place will cause, that the US government will not be able to pay salaries and allowances to the federal or military personnel and pensioners. Social security payments, Medicare and Medicaid will cease as, as well as on student loan payments.
Interest rates rise, including bonds of state and local authorities, mortgage and consumer loans. It will happen because, that Treasuries, which represent the base borrowing rate, lose confidence in. His loss will have to recover by increasing the profitability, the Minister stressed.
I agree with him and CNBC commentator Matthew Iglesias. he says, that as a result of default previously risk-free federal bonds will be risky. "The interest rate on state and municipal debt, Corporate debt and mortgage will increase. The savings will evaporate, and liquidity disappears, because everyone will try to hold on to their money, until they can not understand, what's happening", - emphasizes the expert.
In this case, changes in interest rates will affect the whole world, adds business correspondent Bi-bi-si Kim Gittleson. "If the US government will not be able to return the money, that it must be holders of treasury bonds, Bond price drops. As a result, increase the amount, that the government will be forced to pay investors. This will cause a rise in interest rates around the world, often because they are tied to the US ", - analyst.
All this will create problems for businesses and, Consequently, can to drive the world economy into a long depression.
Dollar kaput
However, experts agree, that the main consequence of default in the US in terms of the rest of the world will be a strong weakening of the dollar. It is due to the fact, that foreign investors will start selling government bonds once "safe haven", and creditor countries will diversify its currency reserves, you finally devalue the US currency. "The dollar will lose its status as a world currency. This will be the most devastating long-term effects ", - stated Geithner.
"Defaulting on debts will lead to the collapse of the dollar and spark inflation in any case", - confirms Matthew Iglesias.
Further, as the chain, negative switch to US creditors. Worst of all have China. After all, Beijing is trying to keep the yuan weaker, than the dollar - to gain an edge in international trade. "If the dollar collapses, Yuan then fall sharply, to continue to be at a fixed rate during the American trade, or the Chinese will lose a vital demand for the opening of its production centers ", - writes columnist Toptenz Dustin Koski.
The collapse of several currencies will almost certainly lead to panic in the market, and no one knows, where she zavedet. However, there is the coin on the bright side. On the need to de-dollarization of the representatives of many countries have already said more than once. true, as long as this process goes very modest pace. AND, perhaps, it is not enough just push a weakening US currency.
Ivan Roshtepiy
