2. What is the reasons behind the debt
crisis??
•The financial crisis that happened in 2008,
had led to:
1-a sharp drop in economic output
2-led to the lack of the economic growth,
3- but they found that this problem was caused by a
lack of profitability in productive areas.
4. government Budget
deficit treasury
Bonds
and
debt
instruments
Foreign
banks country
corporations
5. There were always more than enough people to invest in
Federal government bonds knowing that these bond
were rated to be AAA and it was the safest types of
bonds.
6. • the bond rating has declined from
Ba3 to B1.
• When a Bond ratings below BBB/Baa
are considered to be not investment
grade and are called junk bonds.
7. But the government kept issuing bonds and debt instruments
without having enough revenues to cover this debt.
So the gap between
Government Government
outlays revenues
Kept widening and the debt kept increasing till it reached 14 trillion
dollars were it were about to exceed the debt ceiling, and as the amount
of money that the government can borrow is limited by the debt ceiling,
Therefore the congress has agreed to raise the level of the debt ceiling
on April 15, 2011.
8. If the debt would have exceeded the debt ceiling this
might have led to a real crisis that the US might have
entered
sovereign default this means that the US at that
time will not be able to pay the interest and the
principle at the maturity date of these bonds
thereby creating an international crisis in the financial
market
9. This action was accompanied by a plan
Increase
taxes Decrease
expenditures
the proposal to cut spending was the one who was
supported by many democrats and republicans and
there has been a bill to have spending cuts of roughly $1
trillion.
10. So now the current debt is
$15,071,624,794,970.66
this means that every man, woman and child in
the United States currently owes
$48,358.74
for their share of the U.S. public debt
11. The US is indebted mainly to Americans. foreigners
hold about $4.4 trillion of the national debt, with
China and Japan owning the biggest chunks.
We can see from the chart here that china owns the largest
amount of this debt as they own about 21.09% of the whole
debt owned by foreign countries, or about $1173.5 billion
dollars. Next come Japan with a $914.8 billion dollars, or
about 20.40%.
13. china accumulates a large amount of the US treasury notes .
the RMB is significantly undervalued against the dollar and that
has been a major contributor to the large annual U.S. trade
deficits with China and the loss of U.S. jobs in recent years.
So now the problem can be analyzed in two ways first they don’t
have the money to pay for their debt
second the Chinese products are competing with the US products
all around the world and in the US itself. So now with this unfair
competitive advantage that china has, the US products will not be
able to sustain
.
14. Solution for the debt crisis
Cutting subsidies
Cutting benefits
……………………..
