BEYOND THE DEBT CRISIS, A CONSTITUTIONAL CRISIS:
What’s the problem with the debt of the USA? Well, it can be viewed as worse than the debt of most European countries whose debt led to confidence crises (see the second paragraph below).
This debt crisis has become a government by the fools, for the fools, and it is starting to look foolish, even to the fools. It’s also bringing up constitutional questions, namely on the constitution of the USA, which is really very different from that of other democracies.
It’s no happenstance that no country has a constitution similar to that of the USA. A situation like the present one is simply impossible in other democracies, because new elections are automatically called when a budget cannot be passed. Generally it does not even get to this stage, because a no confidence vote is called well before that (as just happened in Italy).
It’s only normal that the legislative branch would be called to execute the law. However, in the USA, the legislature does not have to govern.
A legislature that does not have to govern does not have to be realistic.
Some will say: so what? The history of the USA show an incapacity to adapt to progress. The Civil War in the USA was, by far, the most deadly civil war in the West since the religious wars of the sixteenth and seventeenth centuries (it killed an order of magnitude more than the French revolution, relative to population). Adjustments could not be made in Congress, until a full blown war.
After the war, it took a century to get rid of institutionalized racism. And I have advocated the point of view that, for a century, plutocracy in the USA has been gathering steam. It leveraged World War Two, and related events leading to it, and following it, that it organized. Now global, the plutocracy installed the 2007 crisis, making the People pay for it, before, during and after.
Right now, sequestration is already a disaster (say on long term scientific and medical research). The evolution of employment, and of the median income, are also disasters. All what the plutocrats want is to starve the beasts, and the beasts are us, the Public.
For the plutocrats, the Republic, as long as it exists, is only a machine to make the richest thrive. And bonds, and Quantitative Easing, are crucial that way.
MORE DETAILS, & A DEEPER ANALYSIS:
USA debt: The total debt of the government of the USA is 16.7 trillion dollars (more than GDP; the number can look smaller when one looks only the debt “held by the public”, but that’s obviously not the important number).
The cash deficit, under Obama, reached 12.5% of GDP. Now it’s 5% and shrinking, thanks to unsustainable “sequestration”, a sort of amputation of the brain to make the patient lose weight. That, realized the bipartisan research arm of Congress, will actually augment the deficit. Very soon, considerably, and durably.
Many take for granted that a country like the USA cannot default, because its debt is in its own currency. That statement is so absurd, so anti-factual, it’s hard to answer. Countries which defaulted in their own currencies are legions. A recent major example is Argentina, which defaulted in 2001-2002. Notice:
1) the banks of the USA operating in Argentina made like bandits from that default.
2) Argentina is still trying to recover from that shock.
The reason why a damaging default for the USA is hard to imagine are the following;
1) The USA is completely self sufficient in nearly everything. The USA is the largest fossil fuel and gas producer in the world (with 22 million barrels a day). It also has the largest sea empire (slightly larger than France’s!), and resources therein.
2) The USA has by far the most powerful, most autarkic military, perfectly capable of protecting 1). And more.
3) The dollar is the world’s reserve currency (although a second one has appeared: the euro!) The dollar is also low relative to the euro. Thus a serious down swing in the dollar is unlikely, and anyway, irrelevant, as planet USA is totally self sufficient (see 1))
But, precisely, that makes it possible for the USA to default!
It reminds me somewhat of the relationship between Spain and. China. China needed Bolivian silver (from Potosi), to strike a currency worth something (after disastrous paper inflation under the Yuan). China had silk and many other precious goods.
The interface between the co-dependent empires, was next to Manila. The Chinese established a powerful Chinatown. Way too powerful: the Spaniards at some point took umbrage, and annihilated it, killing all. What did the Chinese do? Well, they came back, and established another mighty Chinatown, crucial to the Spanish empire. And then the Spaniards had enough, and annihilated it, killing all. And the Chinese came back.
There always will be USA bonds, they will always come back, as long as there is a Pentagon, and it’s mightiest. But there will not necessarily be a democracy in the USA.
Examples are plenty, in history, of republics that became plutocracies. It happened to Sparta. It happened to Athens. It happened to Rome. Even the European empire of the Franks, initially successful because it was less plutocratic than Rome, became riddled with plutocracy, seven centuries later. Florence, started as a republic, also evolved, after two centuries, into a plutocracy. The people loving, enlightened monarchy of Henri III and Henri IV, turned, within a generation, into the horrendous plutocracy of Louis XIV.
Progress can definitively go backwards. History clearly show that republics are the exception, and plutocracies, the rule.