H C Singh

USA under Debt and Debt Default – Effect on US Economy and Also World Economy.

USA and particularly Obama government are facing worst time during July 2011 because of huge debt and even debt default. It is surprising that two individual American citizens have more wealth than their country USA. It was 30th July that US government was desperate in presenting to default as debt payment, first time in American history. Congress imposed the limit of debt to 14.3 trillion dollars. As a result Obama’s popularity has been lowered ever since his getting elected as President of USA in January 2008. On 30 July 2011 it had dipped to 40% while it was as high as 50% in June 2011.

Apples Boss Steve Jobs has more money than US government. While US have 73.76 trillion dollars in reserve, the richest American Steve Jobs has 75.87 trillion dollars in reserve. Obama has appealed to lawmakers to come to an agreement soon on raising US debt ceiling to save America of impending catastrophe spilling over rest of the world as Washington is close to being broke. If US congress does not raise debt limit by Thursday US Government will not be able to pay government salaries and pensions reimburse medical care for seniors and in the worst scenario backroll the foreign aid and operations including wars.

There is a substantial decline in growth of US economy which was only 1.3% in the second quarter of this year, according to Wall Street Journal of USA. In the 3rd Quarter upto July there must have been further fall which upset President Obama and has cautioned the congress and the people of USA.

Indian stocks have posted biggest monthly loss during first six months of the year because of US debt and deadline in US economy. Oil and Natural Gas Corporation ONGC Ltd the country’s largest state owned exporter lost 2.9%. Because of US debt crisis exports to USA from India have fallen, there is crisis in manufacturing where productivity growth was lower in 2000 then in 19,900 with decline in export particularly to USA, It is natural that manufacturing industry to suffer India had good future as Supreme court during second half of 2011 became effective, there is less of corruption and more of growth. However because of fall in Dow Jones of 4.6% during last week, Indian stocks declined in Bombay stock Exchange upto 3.6% during the same period. If US debt issue is sorted out, as is expected the fall, atleast further steep fall in USA as well as in India and other countries of Europe and Asia except China will not be adversely affected.

Though US Senate has passed the debt bill with a view to avert default but the crisis for Obama and US economy remains because of American failure during last decade or so to create more revenues and curtail expenditure. American intervention in Afghanistan for a decade cost America trillions of dollars every year, besides loss of thousands of American soldiers, but US is withdrawing its army without eliminating Taliban. President Karzar is already in trouble as he has lost his brother and Kabul is virtually encircled by Taliban. Uncalled for American intervention in Afghanistan is major cause of fall in economy and the present debt which is bound to be in default.

Senate majority leader Henry M Reid said in a floor speech “Our country was virtually on the verge of deserter” which has been averted. Reid further elucidated that because the debt bell does not raise new revenues as President Obama had retreaded on the demand of higher taxes.

It is seen how debt increased during last 10 years. US debt in 2000 was only 6% and rose to 10% in 2008, but thereafter it rose in unprecedented way to 45% last week of July 2010. It is reported that because of steady rise in debt during July 2010 President Obama did not sleep for weeks. How could he? He had allowed by failure of his economic policy during 2010 to let USA be in worst economic crisis and debt crisis in American History. Worst of all US debt crises is affecting the economy of the entire world. If economic crisis as well as debt crisis of USA, Continue, as seems likely, chance of Obama getting a second term as President seems unlikely or remote.

August 4, 2011 Posted by | Uncategorized | Leave a comment