Part of the US government has closed when the deal on a new budget was not approved by the Congress.China,who is always regarded as the largest creditor to the America government,also raises its voice that US authorities needs to “take decisive and credible steps to avoid a default on its Treasury bonds”.
This shutdown made many employees within the government jobless.Some services are temporary unavailable now,which cause inconveniences to citizens all around the country.But don’t you think it’s proper time for the government to reconsider its economic policies?Why is Uncle Sam in trouble again when he almost recovers from the financial crisis? Let’s throw a light on how the government economic policies work.When US is short of money,it tends to sell China more bonds and cuts the interest rates to increases the assets.However,the debt never seems to decrease so US goes on selling bonds and cutting the interest rate and finally gets into a vicious circle.The overload liabilities outnumber the assets,therefore it collapsed.Although the market tends to reach an equilibrium automatically,it may take a long time due to the excess demand of investments,thus,US needs to reallocate the resources to get to that equilibrium point.
References:
- BBC News:“US shutdown: Barack Obama warns of default danger” 2 October 2013 http://www.bbc.co.uk/news/world-us-canada-24375591
- BBC News:“China tells US to avoid debt crisis for sake of global economy” 7 October 2013 http://www.bbc.co.uk/news/business-24426881
- Image: https://dlshowonline.com/us-debt-crisis-outrageous-news-and-a-ta-ta/eliminate-debt-save-money/