Expert: US national debt destroys this country’s leadership in the market, threatening the rest of the world
The US may run out of money on June 1st, and Mikhail Kovalev, Doctor of Physics and Mathematics, Professor at the Belarusian State University’s Economy Faculty, explained what consequences this may produce for the world
“How is the US debt formed? When the Government does not have enough money, the Treasury issues so-called Treasure Bonds. The latter are usually bought by the Federal Reserve System for issue Dollars – to be further sold. Foreign countries have bought about a third of $31.4 trillion to store their foreign exchange reserves, and the rest have been purchased by private investors and pension funds. The main reason for the debt is that the United States, in order to live well, buys much more goods from abroad than it sells. For example, its trade deficit with China always stands at the level of $400bn. Due to cheap Chinese goods, the US population is getting richer. These goods have actually been paid for with the debt. Eventually, the latter has reached the critical line set by legislators at about 130 percent of GDP (i.e. it makes 35 percent of GDP in Belarus). The growth of the US national debt has also been facilitated by inflation, which increased the required interest payments. It should be noted that non-payments on time on US debt, despite the legend of the reliability of US Treasure Bonds, have happened in history more than once: the first US President Washington devalued bonds to 1 percent of their value, and the Head of the White House Roosevelt paid only 40 percent of the funds on the bonds issued during World War I in 1933. American President Nixon abolished the gold standard of $35 per ounce ($1 was equal to about 1 gram of gold) and, accordingly, depreciated the American Dollar against gold about 56-fold (an ounce of gold now costs $1,970),” the expert said.