Do you understand the terms "inflation" and "hyperinflation?" That is what we will have if we simply "print more money to pay off the debt." And defaulting on the debt would cause a worldwide depression that would make the Great Depression look like the early '90s recession.
If you think about it though, the US national debt situation is really a good racket its got going. To understand it, imagine this: You are able to take out a credit card and borrow from it as much you want. When you max out on the credit card, you the borrower can just declare yourself a higher limit and borrow more. Meanwhile at the same time, the creditors can't come in and repo your stuff or otherwise retaliate no matter how sky high your credit card balance becomes. I mean, if you were given this kind of deal, wouldn't you take full advantage of it?
you're a genius! why don't all countries just print more money.. then we can end world hunger, aids, provide universal healthcare..
We're going to turn into Brazil. ...and if that happens, I want to be a cannibal. The first overweight businessperson who drives by in an SUV is going to be a brisket for me and my friends.
Yup, which is largely dependent on oil-backing... After World War II we realized that who controlled the oil controlled the world (Pearl Harbor, and the Battles of Stalingrad and the Bulge probably sank those lessons in more than anything else) so we set up a bidding system based on the dollar and imposed it on the world. This has meant in effect a canceling of a lot of the price of oil and inflation, with obvious exceptions during the 70s. It is in fact one of the reasons that the current US economy is not really suffering much despite the price of gas doubling. In effect since everyone is paying in dollars it flattens some of the cost in the US. Partly for this reason some countries are experimenting with switching to the dollar. Ecuador has completely switched to the US dollar and Argentina has a dual monetary system. If the EU gets countries to switch to the Euro it means that the US will at least lose part of its WWII boon and it could mean a readjustment in the US' overall world economic ranking, especially with a debt nearly the size of our GDP. Its one thing to have a net value of zero when everyone still has to use the dollar, but if there is a real alternative and you have no net value then your credit rating will definitely suffer. There is no doubt that the Petrol Euro is freaking us out. It is most likely part of what went into the formula to attack Iraq. As for the case of Iran threatening to switch to the Euro, it's likely to have little effect if no one else does it. Iran is fourth in the world for Oil reserves. Although Iraq did switch we have switched it back after this war (intended or unintended, who knows). We get most of our petroleum from Mexico and Venezuela in any case. Our interest in the Middle East is not to secure our oil supply, it's to tax European, Japanese, Indian, and Chinese oil supplies. In other words we are not protecting our flow, but rather we are making sure that every time a country like Iraq sells oil to a country like Japan we get a cut; it's like we're the oil pimps. Another way to think about it is that the US has effectively tied the dollar to oil. We don't have gold backing, but an oil backing. Since all trading of oil happens in dollars. If the price of oil goes up foreign countries have to buy more dollars driving the price of the dollar up so that the buying power of the dollar goes up effectively making the price of oil go back down. This does not negate the price of oil at the individual level, but it does soften price increases at the national level. If the Euro gets into the act it separates the dollar from oil, at least to the extent that foreign countries swith, then we will actually end up with a more truly free floating currency. This is bad for the US economy. We have a somewhat unique/bizzarre economy based on massive credit spending that exports very little. Honestly I don't think anybody really understands how we continue the course we do other than simply faith. Enough people have faith that the system survives.
We survive because- 1. We have the strongest military in the world. 2. China buys up debt and they are stuck because they also are expanding their economy too fast and have fueled their growth with dollars. 3. Consumer bubbles have helped alot, dot.com, stock market, real estate. Eventually though it will come down to oil. The dollar must be the fiat currency of the energy market or else. Any nation that pulled what Sadaam did with the Euro will probably learn how smart those smart bombs really are. Iran should probably back off all their talk about going to the Euro. Edit- and oh yes everything you mentioned.
Yeah, keep in mind that even if OPEC switches to the Euro... making hundreds of billions in the process... they can always switch back to the Dollar...making hundreds of billions in the process. So keeping authoritarian allies does have a purpose. Even if it sucks for Americans and the rest of the world.
