As the dollar decades maintains huge national debt and budget deficit

There are new numbers increasing the national debt and budget deficit of the United States. This creates for the US President Donald trump some problems. However, even at these rates, who long ago would have bankrupted other countries, the US financial system remains successful and attractive. Why the dollar is still afloat, explains the business newspaper “Sight”.

Как доллар десятилетиями выдерживает гигантский госдолг и дефицит бюджета США

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A few days before the end of the next fiscal year (September 30), the Department of the Treasury reported that for 11 months the deficit of the national budget increased by 19%. In the end, he made $1,067 trillion, or 4.4% of GDP. The last time the size of the national debt exceeded one trillion dollars in 2012, under President Barack Obama.

Continues to grow and the national debt of the United States. If at the end of 2017, the first year of presidency, trump, it was about $19,362 trillion, by the middle of February 2019 has exceeded $22 trillion (105% of GDP), updating a record.

The increase in the budget deficit has caused concern trump. In October 2018, he demanded that the administration of the President of spending cuts to all Federal departments and agencies by 5%. “Lose the fat, get rid of waste!” – demanded the tramp, but a year later the deficit has reached a record high for his presidency marks.

Although theoretically, even a five per cent reduction in assumed a very serious amount of savings. For example, the military was ordered to approve the budget of $700 billion instead of $733 billion Landmark proposal came from the mouth of trump in March, was the reduction in the budget of the Department of state and Agency for international development (USAID) by 23%, to $41.6 billion

American analysts believe that all this beauty measures. They attributed the rise in US budget deficit with tax cuts totaling $1.5 trillion, which trump is carried out immediately after coming to power. By 2028, the level of deficit could reach $2 trillion.

In Russia every new round the figure of budget deficit or public debt of the United States, is always the argument that the American financial system is about to collapse along with the dollar as the main global currency. However, until now, these forecasts remain in the purely theoretical realm – the dollar, of course, a little inferior to other currencies, but not give them the palm. Moreover, the us dollar is in a phase of major consolidation in relation to most other currencies, including the Euro.

“For the United States budget deficit has become a normal phenomenon since the late 1970-ies. With the exception of a short period of Clinton’s presidency, during this entire period, the us budget was in deficit. A trillion dollars is just a number, a certain psychological level. Moreover, we must remember that 10 years ago, when the us budget deficit was on the same level as taxes in the US were higher and the current deficit is largely the result of tax reform trump and signals that the US private sector, enough money”, – said the economist Khazbi of Budanov. This conclusion, according to him, flows from the accounting formula, the sectoral balance: the sum of the flows of the budget, foreign trade and the private sector is always zero. The United States has long observed the budget deficit and deficit trade balance, therefore, the private sector is in positive territory.

The question itself is about a US default looks a bit weird, given that the U.S. emit dollars, which nominated their obligations, says the scientist-americanist Alexey Chernyaev. He recalled that until now the Congress has always raised the debt limit, and huge volume of emissions and the growth of the debt had no relevant negative consequences for the us and global economy.

“The size of public debt is a function of the position of the country in the global system. And while the US remains the hegemon in the world system, they are, in fact, can afford any amount of public debt and budget deficit with no visible effects. For comparison, Russia, these somersaults have already led to fatal consequences,” said Chernyaev, citing historical analogy of two centuries ago.

Britain during the struggle with Napoleon had fantastic indicators of public debt – about 470% of GDP, and this does not lead to its financial collapse. Due to the role of global hegemon Britain could borrow money from all over Europe, and France waged war on taxes and indemnity. In a sense, the outcome of this fight was already predetermined at the level of political economy. But if the position of the US as hegemon (in particular, in the role of Creator of the world’s reserve currency) will be lost, there will be a collapse of American Finance. And this will be a consequence of the loss of the position of hegemony, not the cause.

“The dollar is only the external contour and the tip of the iceberg of complex financial systems, which develops and transformirovalsya in order to reproduce the existing socio-economic relations. It would be incorrect to evaluate the dollar in terms of the classical national currency and monetary system of the old capitalism. The new system allows the dollar and the entire financial system not just resilient, it is often contrary to “normal” economic logic, but also to ensure global hegemony. Which, of course, does not imply the inexhaustibility of this system,” adds the Professor of the Higher school of economy Pavel Rodkin.

According to him, the notorious collapse of the dollar is not the cause of the collapse of the United States, as the result of another transformation of the global financial system. However, at the moment, waiting for the collapse of the dollar or collapse of the us economy are not much different from the expectations of the famous explosion of the Yellowstone volcano in Wyoming.

Disturbing agenda to trump

However, the domestic market of the US budget deficit creates more and more problems in terms of the slowing economy. Last year, us GDP grew by 2.9% in the first quarter of the current year the growth amounted to 3.1% in annual terms, but in terms of a deepening trade war with China this can be a limit which it is capable of the us economy. According to the June forecast of the Federal reserve system (fed) this year GDP will grow by 2.1% and 2%. This is about twice less than the performance of the 1990-ies.

“Trump is a supporter of the conservative market approach to economic policy. As President, he immediately lowered taxes, based on the idea that lowering taxes leads to increased economic activity, says Khazbi of Budanov. – However, economic policy should not be limited to just giving money to the private sector. And the start of economic growth through public investment, which would increase the welfare of the poorest strata of American society, prevents the U.S. budget deficit. Desirable level of U.S. economic growth was not achieved, and now trump trying to look for a scapegoat, for example, requires a “tweet” from the fed rate cut to zero. All this testifies to the disparity of reality of the plans, and ratings trump fall.”

From this point of view symptomatic event was an indefinite strike of employees of General Motors, announced United automobile workers Union, the US as of midnight, September 16. According to recent reports, did not work out about 50 thousand workers 31 the company’s plant in the United States. Strike with demands of higher wages and affordable healthcare and job security is already considered the largest since 2007, when the protest was attended by 73 thousands of workers of GM.

In other words, the proverbial rednecks – nuclear electorate trump – actively demonstrate dissatisfaction with the economic policies of the American President. In a letter to the trade unions, in particular, said that GM over the last three years was in North America a record profit of $35 billion.

According to Khazbi Budunova, the current situation in the us economy requires the adoption of a “green new deal” that will contribute to the growth of wealth through investment. Now on the eve of the presidential election of 2020 among center-left politicians in the United States intensified debate about the sources of these investments. The Senator from Vermont Bernie Sanders, who in February expressed readiness to participate in elections, in favour of a solution to the shortage of money issue in the spirit of modern monetary theory (MMT) through the mechanism of issue or, simply, printing money. This doctrine, contrary to Orthodox ideas about the nature of inflation, says that increasing the money supply not only leads to higher inflation, but also contributes to the smoothing of economic imbalances.

A different point of view has the Senator from Massachusetts, Elizabeth Warren offers a more traditional solution is to increase the withdrawal of money from the rich to further a more uniform redistribution.

The theme of the budget deficit can indeed emerge in the course of the upcoming presidential campaign, says Aleksey Chernyaev, but we should remember that the Republicans at least since 2010, is actively used by the subject under pressure from the libertarian wing of the party – and nothing significant happens.

“The demands of the libertarians to stop increasing the national debt of the US is actually ignored. Therefore, the main trend is unchanged: the US national debt grows incrementally with any authority – and trump in this respect the situation has not changed, despite expectations”, – the expert concludes.