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United States as a Net Borrower

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  1. Introduction
  2. History of the United States National Debt
  3. Financing the path to economic growth
  4. Conclusion

Performing a detailed scrutiny when an international debt crisis strikes, would reveal that struggling countries are guilty of pursuing a self defeating strategy in their build up to foreign debt. Most of the problems that besiege the modern economies are not in any way a swarm of locusts in the form of a plaque, sent by an angered supreme being. This is instead a product of stubbornness of those in authority and the incompetence demonstrated in government interventions, which never confronted the reality of the situation. The United States net borrowing suggests a complex economic situation partly contributed by the need to meet trade deficits, settle fiscal deficits and pursue global-oriented programs for the benefit of the world population. The status of a debtor nation emerges when a country becomes persistently dependant on foreign investments because of the trade deficit and spending program (Whetts, 2010). The historical path adopted by the United States, feed to the continued condition of a net borrower, where strategies pursued to stabilize the international debt translate to growing debts.

[...] The Top 5 Foreign Holders of U.S. Public Debt. Retrieved December from Stilwell, V. (2013, September 25). Household Net Worth in U.S. Increases by $ 1.3 Trillion . Retrieved December from Thoma, M. (2012, March o5). Did the Stimulus Package Work? Retrieved December from UNITED STATES AS A NET BORROWER 11 Whetts, B. (2010). [...]

[...] However, owing to the unsustainability of the existing imbalance in the world economy, the federal government need to limit its borrowing as it adjusts to fiscal policies and domestic savings. This will prevent a sharp fall in foreign funding from toppling the economy beyond self-recovery. UNITED STATES AS A NET BORROWER Bibliography Baker, P. (2009, February 9). At Town Hall Rally, Obama Pushes Stimulus Plan. Retrieved December from Faulkner, R. K., Shell, S. M., & Schneider, T. E. (2009). [...]

[...] In agreement with the common reasoning, economic agents should avoid extreme borrowing since it comes at a cost of financing high interest repayments and restricted covenants. If the lending institutions and foreign investors would experience increasing demand for their funds, they would certainly increase the interest they charge. Given the dissaving trend of the citizens since embracing consumerism, the downside of the growing indebtedness of the government should be rising borrowing costs as the lenders hike their charges (Faulkner, Shell, & Schneider, 2009). Interestingly, the cost of borrowing is falling steadily as the federal debt ceiling is raised to accommodate for demand stimulus. [...]

[...] carrying a total debt of 6.6 trillion (Whetts, 2010). The entrance to the new millennium saw the country focus more on trade and shift away from war activities. The trade relies on importing technology, crude oil and machinery as the primary inputs while exporting raw materials, consumer and agricultural products. This leaves UNITED STATES AS A NET BORROWER the economy at a growing trade deficit since collaborating with trading partners posting soaring economies such as China and India. As citizens of these countries benefit from revenue generated by exporting to the U.S economy, its citizens are feeling the pressure of lagging 4 economic growth. [...]

[...] This generates an atmosphere where citizens and the government are spending more than they afford through their revenue. This leaves the national debt increasing, which imply an extra burden for the U.S. citizens. Financing the path to economic growth Using an economic stimulus package involves directing government spending and tax cuts to revive the economy during recession. This has been the president's concern when implementing a plan making the U.S. more energy efficient, provide more employment opportunities, and supply citizens with tax cuts and rebate checks (Whetts, 2010). [...]

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