| The one big thing the US has going for it is that there is enough money floating around in it to turn the problems around. Third world countries get screwed because their interest on their debt matches their GDP so it is impossible to keep up let alone pay the debt down.
Canada was facing a deficit crisis about 15 years ago and through allot of painful fiscal restraint, things are back on track. The states can do the same, the problem is to find the will to do it. I wonder what the debt service costs are for the US debt as a portion of the current budget. I would not be surprised if the debt service cost is a significant portion of the current annual deficits.
On the other hand allowing the currency to devalue helps at both ends of the scale. It will reduce the amount of the debt as a portion of GDP and it also will spur exports to mitigate the trade imbalance. The biggest negative issues are that this will lead to inflation, erosion of wealth and higher interest rates.
I would guess we will see a moderately painful correction but I can't see it becoming a collapse. I would also guess you will see a reduction of the standard of living for most folks. I still think one of the primary issues with the US economy is the inequitable division of wealth. To much of the money is in the hands of a few for a 1st world country. |