US Debt: A Recipe for Economic Disaster?

The foundation of the US dollar is already under threat. If it collapses, it will take other economies and currencies down with it.

The United States has dug the biggest economic hole in human history. It's become so severe that if you listen carefully, you’ll hear the Chinese -- the biggest holders of American debt -- wondering if they’ll ever get their money back. The foundation of the US dollar is already under threat. If it does collapse, it will take other economies and currencies down with it.

At the summer 2010 meeting of G20 countries, European countries including the United Kingdom and Germany urged President Obama to implement austerity measures with them. The American president refused. Instead, he steered the economy in the opposite direction -- by pumping billions more into the economy.

The United States is moving to the left. Meanwhile, European countries, recognizing some major flaws in their system, are moving right. Some socialist aspects of their societies are being reduced. For example, the tax burden on citizens and companies are being relaxed even as they decrease government spending. Europe is moving toward free enterprise.

In essence, the Obama administration plans to tax and spend the country back into prosperity. While it might make sense in theory, the policy has never been attempted in this magnitude before and it can fail (at my firm, we're believers in a small government). It's also important to note that more than four out of every 10 dollars today is already borrowed -- in stimulus spending. Another concern is that “redistributing” the wealth is inefficient. (more)