US debt crisis

The United States of America is the biggest debt-holder coun­try in the world. Its national debt has exceeded $34 trillion. Owing burgeoning piles of debt has made the US economy and defence vul­nerable. The boss of America’s biggest bank, CEO of JP Morgan, Jamie Dimon says, Washington faces a global ‘rebellion’ over the record US debt: ‘It is a cliff. We are going 60 mph towards it’.

The current US debt ratio is 120% of its GDP, and by 2035, it will exceed 130% of its GDP. No­tably, most debt is held by the US allies. The nations vividly exposed are Japan, which owned $1.1 tril­lion as of November 2023. China accounts for $782 billion, the U.K $716 billion, Luxembourg $371 billion, and Canada holds $321 bil­lion. Moreover, foreign investors hold $7.6 trillion US debt.

President Joe Biden once said in his public session, “we are able to borrow because we are able to pay our debt.” But the afore­mentioned statement seems to be fragile. The US is the biggest defence spender in the world. In 2022, it spent over $800 billion on defence. The unabated burgeon­ing debt has the biggest reason that is America’s direct or proxy wars. Through fiscal year 2022, the US federal government has in­vested and obligated $8 trillion on the post 9/11 wars in Afghani­stan, Iraq, and elsewhere.

Hypothetically, if the United States defaults or posits lame ex­cuses to deliver back a plethora of debt, it would certainly collapse its longstanding economy dras­tically. Such an uncertain disas­ter would severely hurt its mili­tary might. In parallel, the anti-US bloc, including China and Rus­sia, are globally recognized econ­omies, both striving to dismantle contemporary authority. The eco­nomic debacle may drown the dol­lar’s hegemony forever. The world might witness the rise of another profound global vehicle currency superseding the dollar. A global recession is concomitant, unsur­prisingly, similar to 2008.

It is exquisitely essential for the US government to redress the di­lemma. Tackling the precedent predicament may require another humongous debt, but evading the situation temporarily would cer­tainly wound Washington. Ame­liorations and some provisions are the ultimate ways to redress the cause. Undoubtedly, the country must learn from its past actions of ‘carrot and stick’ policies and must play aptly in the international are­na to retain the status quo ante.


Khairpur Nathan Shah.

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