As an investor who has followed financial markets for many years, I have learned that reports of financial events in the mainstream media can be very misleading. Some bloggers seem to have fallen victim to the superficiality, with invalid proclamations that the U.S.A. is broke and young people face a tough future.
The United States is nowhere near broke and is not even in financial hot water. Our headline debt equals less than what Americans earn in a year, which is much better than some European countries. Part of the debt is one government agency owing another, and much of the rest is debt our government owes to its own citizens. Since the debt is denominated in dollars, the U.S.A. can always print dollars to pay off what it owes.
We also have to look at U.S. assets. What would the United States sell for? The U.S. has the strongest military in the world. What is that worth? We also have minerals, land, and a vibrant society. Our assets are worth much more than the debt.
It is true that the U.S. is spending too much relative to its revenue. It is true that this can't go on forever and it is best to correct the budget now. It is also true that the U.S. is a wealthy country nowhere near bankruptcy.
It is not true that young Americans are condemned to a bleak economic future because of the debt. What is really going on is that the American population is aging, and this is a burden for the young. The economy is global, and this is a challenge for those who lack education and skills. Young people need to do more than get a college degree -- they need to actually learn skills relevant to the global economy.
The Standard & Poor rating downgrade of the U.S. is mostly theater. S&P is saying nothing the markets haven't known for years. No matter what S&P may say, the low rates at which the treasury borrows is proof positive that the current level debt is not excessive.
We have real economic challenges going forward. Our population is aging, which means higher health care costs. We need an energy policy: Greater use of alternative fuels could cause an economic boom. If we can come together, we could solve our economic challenges.
