Vanderbilt's First and Only Nonpartisan Political Journal

Vanderbilt Political Review

Vanderbilt's First and Only Nonpartisan Political Journal

Vanderbilt Political Review

Vanderbilt's First and Only Nonpartisan Political Journal

Vanderbilt Political Review

The Debt Crisis: We All Know How Congress Is Reacting, But What About the Rest of the World?

As the United States Congress plays chicken with the current debt crisis, international leaders are showing much less patience with America’s current state of affairs.

Predictably, countries that have substantial investment in US assets are paying close attention to the possible futures of their finances, and they do not like what they see. Japan and China, specifically, have voiced their concerns

Japanese Finance Minister Taro Aso said in a statement last week that “The U.S. must avoid a situation where it cannot pay (for its debt) and its triple-A ranking plunges all of a sudden.”

The Chinese took things a step further by publicly and specifically addressing Chinese interests. Said Zhu Guangyao, Chinese Vice Finance Minister: “We ask that the United States earnestly takes steps to resolve in a timely way before October 17 the political (issues) around the debt ceiling and prevent a U.S. debt default to ensure safety of Chinese investments in the United States and the global economic recovery.”

International economic leaders have also taken a strong position against the United States’ failure to solve the debt crisis, the deadline for which is Thursday, October 17. They made clear that the uncertainty concerning United States futures is enough to substantially damage the economy across the board.

President of the World Bank Jim Yong Kim said, “Inaction could result in interest rates rising, confidence falling and growth slowing.”

Christine Lagarde, managing director of the International Monetary Fund, echoed Kim’s statements, warning of the potential for another recession.

On the whole, then, international leaders are clearly concerned about the wide effects of a US shutdown or debt default. Confidence, or lack thereof, has even begun to manifest in the markets.

Internationally, stocks rose slightly this past Friday in response to the beginning of talks between Republican and Democratic leadership. While a solution is yet to be reached, the very fact that the issue is being discussed sparked confidence on Wall Street and in Asian markets.

With Asian markets not yet open today, October 13, it remains to be seen whether or not international investors remain confident. The fact that the Dow Jones, S&P, and NASDAQ all opened down this morning as a result of Congressional failure to cut a deal over the weekend, though, is not a good sign. With time running out before the October 17 deadline, the productivity of talks between Congressional leaders and the White House is likely to have an even greater effect on international markets.

International attention to the United States current economic situation helps to put the debt crisis into perspective. That is, widespread concern abroad shows that US debt is not just another issue over which Republicans and Democrats can fight for power. The conversation over the debt ceiling is largely focused on partisan politics and the personal power of Congressional and White House leaders, yet each day without steps toward a resolution has a profound international effect. International perspective only highlights the question many are already asking of the US Government: Are you willing to risk the future and stability of the United States to play a game of partisan chicken?

[Image Credit: http://futurepredictions.com/tag/stock-market/]

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The Debt Crisis: We All Know How Congress Is Reacting, But What About the Rest of the World?