Essay on U.S. Must Manage Debt to Help the World's Economy

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The United States once had the largest economy in the entire world, and when there are problems with the US economy shock waves can be felt all over the world. The global economy is inter-connected on several levels due to the amount of international trade which occurs. If the United States does not find a way to manage its debt, or find a way to reduce the debt, it would increase the cost of finance for business because of the increase in interest rates. This could lead to high inflation. The stock market would also suffer badly as investors might feel that investing in the US market was too risky. This would cause the stock markets to fall as investors would take their money to other countries, or invest in gold; which many people have …show more content…

A London-based Wall Street Journal reporter, Charles Forelle warned the enthusiasm over investing will change dramatically if the shutdown continues, and especially if the U.S. government defaults on its debt. European markets are currently the most susceptible, and any delay in the stabilizing the US market will delay economic recovery there as well (Krugman, 1999). According to a senior International Monetary Fund official, in case of a U.S. debt default the entire global economy will be negatively affected, Stock markets crashes in many countries is a distinct possibility which will add to the problems of the recession that most of the world is currently undergoing. More damaging could be the failure to raise the debt ceiling which could cause a default in most economies is increasing ambiguity to a still shaky global economy. Although the U.S. can probably sustain a short economic shutdown, a prolonged one will seriously impair the financial system leading to the collapse of the global economy. A major portion of the operations of the U.S government were shut down completely after the Senate could not reach an agreement on government spending at the start of the new financial year. Republicans are not approving even a temporary spending bill unless there are radical changes in Obama’s 2010 health care law. Both parties are imposing conditions for increasing the government’s $16.7 trillion

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