If the United States goes bankrupt, will there be an international financial crisis? What would be the consequences for other countries?
Profile photo for Elliott J. Schuchardt Elliott J. Schuchardt · Follow J.D. in Law, Columbia Law School (Graduated 1993)Sep 30 If the United States goes bankrupt, will there be an international financial crisis? What would be the consequences for other countries? There will be a brief period of adjustment. However the “crisis” will be much smaller than is commonly expected.
The collapse of the U.S. dollar will cause North America — and particularly the United States — to lose purchasing power. Mexico and Canada will lose 50% of their exports overnight. China will lose about 16% of its exports.
Due to this contraction, there will be a need to replace the liquidity — and demand — that the U.S. dollar formerly provided in world markets. If the dollar drops, it means that some alternative form of liquidity will be in place — likely the new currency to be issued by BRICS.
However, the transition is not all doom and gloom. There will be a silver lining for much of the world, in the transition away from the U.S. dollar. The products formerly exported to the United States will now be available for the rest of the world to consume.
The United States has 4% of the world’s population, but is currently consuming 20% of the world’s goods. This is due to the petrodollar arrangement, which keeps the dollar artificially high, and allows the United States to import at will.
When the petrodollar no longer exists, there will be a large surplus of goods that will now be available for the world to enjoy.
Oil prices will drop, in non-U.S. dollar terms. This will allow other countries to buy oil that formerly went to the United States. The same will happen for other products, such as Mexico's fruits and vegetables, and manufactured goods.
Vladimir Putin once said that the United States was a “parasite on the world economy.” This is what he meant.
Thus, the world does not need to fear the coming currency adjustment.
However, the effects in the United States could be devastating. The United States is facing an existential threat. It needs to manage the decline of the dollar immediately.
BRICS currently controls 48% of the worlds oil market and 43% of the world’s grains. BRICS is almost ready to pull the trigger.
What you think?