The Us Is Bankrupt

Whether the US is bankrupt or not has led to many debates lately. Some people say they are certain that this is America’s swan song while others think that bankruptcy is out of the question. Probably the truth is somewhere in the middle since both sides have solid arguments to support their own beliefs.

To be able to say for sure whether the US is bankrupt people should first of all look at the definition of this concept. Bankruptcy can be declared by a person or an organization that cannot pay back what he or it owes to the creditors. Bankruptcy is always declared under some regulations established by national forums or in the case of countries by international organizations. Some say that a country cannot possibly claim insolvency while the examples from the past seem to contradict them. For example after the Second World War many countries went bankrupt, but their insolvency was strictly connected with the war and its effects on the economy. However, there are still countries that could not pay their debts in the last period of time. The list includes Zimbabwe which is one of the poorest in the world.

One of the first signs that really made financial analysts worry that the US might be in serious trouble is the Standard & Poor’s rating downgrade from AAA to AA+. It came as a shock even though the US accumulated neither millions, nor billions, but trillions of Dollars as debt. The fact is that the huge debt of the US has never been equaled by any other state. However, no other state has the same powerful economy as the US. Unfortunately the downgrade led to more speculation about the possibility of facing bankruptcy.

One fact is for sure. No matter how big is the US debt, one cannot compare this country with other countries that face insolvency nowadays. A good example would be a comparison with Greece. First of all, the US has an immense potential that Greece cannot possibly equal. Moreover, Greece is a small country that has always earned its money from tourism. The US has many profitable industries that are still very productive, unlike Greece which has failed in all industries.

As most financial analysts know each country can contract loans only if it is a solvable customer, meaning if it can pay back its debts. One of the main things a country can guarantee with is the national gold deposit. Statistics from 2010 place the US federal gold reserves on the second place after the Eurozone with 8,133.5 tons of gold while Greece is on the 32’nd position with only 111.7 tones. The difference between the two is obvious as the US is the most powerful nation on the planet from this point of view. Because gold is a real power nowadays, many other countries such as China decided to buy gold to become stronger at an international level. In what concerns whether the US is on the verge of bankruptcy, there is no right answer. It all depends on the Washington administration and on the good will of the other powerful countries all over the world.

By: JacquelineBrewster

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