Unsustainable: Debts Ruining The Economy

Debts are rising at every level of the economy. The national deficit is skyrocketing over $9 trillion and it was announced today that the current account deficit has hit a record 7% of GDP. America is in an unsustainable economic situation.

Source Buzzle:

"The United States ran up a record current account deficit with the rest of the world last year, Washington will reveal this week, increasing fears about the long-term resilience of the world's largest economy.

Figures to be released on Tuesday are expected to show that America plunged $200bn into the red in the last three months of 2005, putting the current account deficit for the year as a whole at an unprecedented 7 per cent of GDP.

Surging imports last year reflected the economy's extraordinary resilience, and Asian central banks continued to gobble up US debt, helping to keep borrowing cheap; but analysts say the yawning deficit will put downward pressure on the dollar in the months ahead.

'In the long term, it's unsustainable,' said Paul Ashworth of Capital Economics. 'The solution will have to involve curbing the appetite for imports, and a fall in the dollar - the question is when.'"

Our economy is propped up by foreign lenders- think of them as our landlords- who buy shares of the U.S. debt. As the dollar's value declines and countries look to shift their holdings away from dollar denominated assets and into those that are more profitable, the U.S. economy will no longer be able to sustain our massive deficits. Our foreign dependency- intensified by faulty trade policies like NAFTA- have jettisoned jobs and opportunities abroad and set the country up for long-term failure.

America must fight to improve industry domestically, investing to make our economy prosper by producing and selling to the rest of the world. If we don't act to fix the flawed fundamental underpinnings of the present economy, our prosperity will in all likelihood drown amidst our ever mounting debts.

Front Page Photo by Digiart2001- Flickr © Some rights reserved

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