“The greatest country on earth” is faltering due to partisan efforts to blame those across the aisles, creating a vacuum in which the economies of the world will soon descend into, establishing the fact that the dreams of the past have become today’s nightmares.
Globalization was an objective of past generations in hopes of creating a global community in which all goods and people would be able to move freely. An interconnected society, they said, in which all nations would be able to have direct communications, as well as be able to readily provide assistance of any form to fellow nations. The dreams of the past have come to fruition as the links between each nation are in existent but they have become coated in fiscal gilding. As seen in the “Gilded Age” of post-Civil War America, society is coated in a fake layer of gold, an ostentatious display meant to serve as a facade of worth and prosperity. The interconnected economy, the global financial system, led to wide spread of prosperity and economic growth for many nations. Asian markets such as China and India are able to grow at extreme rates near 10% because of the readily available investments of Western markets. Yet there doe exist a mutual dependence of each economic market upon another, which has led to the current fiscal dilemma.
Foremost among recent developments are the struggles of the US against party line stubbornness that seems to only propagate throughout supposed bipartisan negotiations. Along with GOP Majority leader Boehner, the Republicans have withdrawn to their corner of a tediously long and overdrawn boxing match against the other party, the Democrats and Senator Reid. The concept of opposition parties is to inspire healthy debate to ensure the equality of the nation, to ensure that the will of the people is presented by the government, but not to bicker and pester for extended periods of time. The similarities between the Reid and Boehner plan are evident, but it is only Reid that has taken action to work across the aisle to develop the Boehner plan along lines to which President Obama would accept. Their efforts to appease both sides has been sluggish but the attempt at mediation between opposites may serve as the spark needed to bring logic to fruition. If logic prevails, a long term deficit fix may become reality, as well as a potential bipartisan committee to mediate future problems, a much needed concept in times of extreme polarization.
“This isn’t a game of chicken. This is a game of reality. We’re about to go over a cliff.” – Reid.
Moreover, the IMF has stood fast in face of growing global problems, stating clearly that the US must splinter the political impasse in Congress. The IMF stated that a US default would “have significant global repercussion, given the central role of US Treasury bonds in world financial markets”. The US stands as a beacon for Western growth and the potential for the US to default may stand as an overriding symbol for weakening confidence that even major countries in Europe cannot be trusted to pull through the growing calamity. Without the individual power to remedy the situation, the European nations would be forced to borrow, provoking a spike in borrowing costs for multiple industrialized nations as investors lose confidence in government debt. This would further handicap wealthy nations along with faltering growth and stagnating employment rates in the West. Manipulating Eisenhower’s “Domino Theory”, the defaults and crisis of one nation will spread and topple its partners and the mutual dependence of every nation on global trade will result in a global toppling of the financial system.
Furthermore, the developments in Europe have demonstrated the need for individual action, as well as international action to assist in a growing crises that spans both land and sea. Despite the breakthrough in negotiations by French President Sarkozy and German Chancellor Merkel in creating a second sweeping bailout for Greece, Moody downgraded the nation’s debt to junk bond territory. The ability for Greece to descend into one of the worst recessions in history but receive an unending stream of assistance from the backbone nations of the EU illustrates the markings of desperation for the EU. Collaboration has only yielded efforts to continue a stream of money and investment to which Greece has not been able to bounce back upon, nor have they been able to reciprocate any funds towards private investors.
The resolution to “throw money” at Greece has led to Moody warning healthy European nations, on the hook for big bailouts, to be aware of potential downgrade, emphasizing the vulnerability of France, a major trade port for America and Europe. Evidently, the limited default of Athens may become a model for other ailing nations such as Italy and Spain, further eroding the value of the Euro and the foundation of the European Union, an organization standing as a trademark of globalization.
In Britain, a long time ally of the US, the new conservative party under David Cameron has also grown tired of the rising problems of the global financial system. Because of the independence of its currency, Britain has been able to isolate itself from the majority of European crisis but its reliance on trade and investment, like every nation, will leave it open to future problems because of the lack of fiscal security in its economic partners. Similarly, the Liberal Democrats of Britain have grown tired of political rigidness and American arrogance to the growing problems of the fiscal situation, emphasized in Vince Cable’s statement: “The biggest threat to the world financial system now comes from a few right-wing nutters in the American Congress”.
Lastly, the Asian markets have also begun to feel the erosion of its trading partners overseas. From New York to London to Tokyo, problems have bee emerging, illustrating the approaching tipping point for the globalized economy. Thus far, the most prevalent fear of China, the world’s largest holder of US debt, is seeing the value of its investment decline under the circumstance that the credit rating agencies were to downgrade the US. The mutual dependence of globalized economies is no more prevalent then in the relationship between the US and China. The trade between China and the US reached an estimated $385.54 billion in 2010, and in 2010 the Chinese own over $900 billion in US bonds. Without one another, the growth and mere existence of their economies would falter and collapse.
China serves as one of the largest investors in US trade, and with the funds available from US trade, China is able to ensure the development of nations such as Brazil, Taiwan, Cuba, and even South Korea. The US and China serve as the hub of all economic development for their respective hemispheres, illustrating the importance of their continued relationship, as well as the existence of roots connecting every fiscal organization in the world. According to Thomas Mayer, the chief economist at Deutsche Bank in Frankfurt, “the only nations that would not feel such an event are those not integrated in the global financial system”. Coincidentally, the financial system has co-opted third world nations (industrializing, backward nations, etc) into the system because of their dependence on the availability of resources and trade from the modernized nations of Europe, North America, and Southeast Asia.
“The Whole World is One Neighborhood” – Franklin D. Roosevelt