Tag Archives: debt crisis

China Offers US “Advice” On Debt

China has always been a player in the American debt crisis for years vis a vis incessant American borrowing, and even they are taking notice and weighing on the ongoing fiasco. In a statement on the Chinese State Administration of Foreign Exchange’s Website, the Chinese government put in their two cents on the matter:

“We hope the U.S. government will take responsible policies and measures to boost global financial market confidence and respect and protect the interests and investors.”

What this means in the short or the long run is hard to say, specifically, but it is no small secret that America is going to have to pay back the Chinese at some point. Even more pointedly, the Chinese government:

“[...]noticed the opinion expressed by S&P and other rating companies regarding the credibility rating of the U.S. sovereign debt.”

Not only is this a somewhat embarrassing talking to, it is a reminder that this debt crisis is not domestically contained. That is, there are repercussions for foreign affairs if we are to default and see our credit rating taking a hit after a Moody’s evaluation. An American default would certainly send shock waves throughout the global economy.

Contains information from CNN.

Debt Crisis “Self-Created,” Says Obama

As the struggle to come to a compromise on the deficit drags on, the tension across party lines and the unhappiness of the American people regarding the actions of their politicians have grown exponentially. Nobody seems to be more frustrated with the current order of the day than the Commander-in-Chief himself, who is responsible for the fate of the economy regardless of what forces or people help to put a potential decline into motion. If a deal is not reached by August 2nd, Obama will be the one to receive the brunt of the criticism despite the GOP’s role throughout this debacle.

Obama described the debt crisis as “self-created,” which he went on to explain:

“This is actually a self-created crisis in some ways. It has to do with folks who are digging into set positions rather than saying how do we solve a problem.”

Obama’s heated back and forth with John Boehner, Eric Cantor, and the GOP at large have has frustrated Americans, and rightfully so. It’s painfully obvious at this time that what America needs is problem-solvers, people with mental flexibility and no allegiances to stubborn partisan thoughts. It is also painfully obvious that America is sorely lacking in people who fit the aforementioned profile. Well, it’s that or certain people in Congress are purposely holding back progress. As a result, talk of the withholding of Social Security checks has emerged, to the chagrin of millions across the country who depend on those checks to live. The President has even gone back and forth with Cantor on that point as well, with Obama telling the House Majority Leader “not to call his bluff.” The debt crisis may not be accessible to all Americans, and the effects of the August 2nd deadline coming and going–and all the major repercussions of outcome–may not be completely understood by many Americans, but the talk about Social Security checks not being sent out is one that hits home in an undiluted and direct manner. It is a language that everybody understands; it doesn’t take Ben Bernanke to understand that not getting that check could have potentially disastrous effects for millions of Americans.

The Gang of Six proposal–a plan drawn up by 3 Democrats and 3 Republicans in an attempt at bipartisan cooperation–is a perfect example of the impossibility of compromise up to this point, and the fragile nature of any positive steps that can be made throughout the process. While the proposal gained traction on Monday, it just as quickly lost it on Tuesday in the span of a mere 24 hours.

One step forward, two steps back.

Contains information from CNN.

Riots in Athens Over Austerity Measures

Violent protests of Greece’s austerity measures have redoubled, as the Greek people have continued to express their dissatisfaction with their government’s fiscal irresponsibility and their accompanying duplicity regarding the actual severity of the situation. The economic situation provides only grim prospects for the nation, as the measures, while necessary in order to hack away at a deficit accrued over many years of rampant spending, will decrease the overall standard of living significantly. As a result, the Greek people have vented their frustrations in the streets, but it is but a flailing, helpless protest they are waging. Mark Blyth, a professor of international political economics at Brown University, put it in graphic but apropos terms:

“In Greece, they’re basically hacking themselves to pieces.”

Dark words for a dark time, and although they are not words anybody in Greece or any other participant in the global economy wants to hear, they are what they need to hear. People expect the world to progress exponentially, never dipping back down and never relinquishing a standard of living that has come to be expected. Countries like Greece, Ireland, Portugal, and yes, even the United States, may be in for a reality check in the next couple of decades as they try to pay back bailout funding to resuscitate failing economies saddled with deficits representing a significant percentage of annual GDPs (and often exceeding them). The decisions will not make any of Greece’s political leaders popular by any means, especially PM George Papendreau (who recently received a vote of confidence by such a small margin that one can hardly consider it a representation of confidence). But, the question that nobody wants to answer is: what are the alternatives? For Greece, who has received bailout funding from the IMF and private investors (e.g. European banks), there don’t seem to be any. However, that won’t stop its people from being unhappy with what has transpired, and who can rightfully blame them? Irresponsible spending done by those in power was naturally beyond their control, and the current response in the streets is but a manifestation of that anger.