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Obama Must Act Now to Stop US Debt Crisis

By David Skarica   |   Monday, 12 Jul 2010 09:41 AM

I usually don’t weigh in on politics.

However, the fact of the matter is that political decisions can affect economies.

Look at Greece, where huge payouts to the public sector and payouts for pensions and the like have bankrupted the economy and caused a debt crisis that affected the euro and the Greek stock market.

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At the G-20 meeting, there was a real consensus to lower the debt levels of governments around the world.

Now firstly, don’t believe that cutting back spending will force us into depression. Cutting government spending and getting your fiscal house in order creates confidence and tends to lead to increased foreign investment.

This is what countries like Chile, Canada and Australia have experienced in the past 20 years as they made the move from socialist to business friendly.

European nations have experienced bankruptcies. The British lost their empire after World War II as government debt to GDP soared to 250 percent. The French experienced bankruptcies in the 19th century and Germany, of course, had the experience of Weimar Inflation.

Basically, these countries have learned the destruction that excess debt can breed and it is a lot worse than a so-called double-dip recession.

The United States hasn’t learned this same lesson.

The U.S. dollar is the reserve currency of the world. This has lead to its political leaders being arrogant. The U.S. leaders can anticipate that there will be a run on the dollar.

This is why President Barack Obama thinks he can spend and spend and spend without any consequences.

Instead of begging other leaders to keep stimulus spending to prop up GDP numbers in a pathetic attempt to get re-elected in 2012, Obama should realize that the U.S. is in a fiscal mess.

With every other nation in the world, except the United States, looking to get their fiscal house in order, Obama should try to clean up the mess before the nation falls into a debt abyss.

Expect a U.S. debt crisis to occur within the next few years.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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