Simon English: Mark Twain was right - take the US off your worry list
Thursday 08 November 2012
Outlook Mark Twain said: "Those of you inclined to worry have the widest selection in history." Another one for your list: the US "fiscal cliff".
Worry warts have been banging on about this supposed impending disaster for a long while. President Barack Obama's victory gave fresh stimulus to the calamity crew, those for whom America has been about to go bust any minute now for at least the last 40 years.
From Reuters yesterday: "US investors will hit trading floors this morning with the same President and the same problems in gridlocked Washington. First up: a looming budget crisis that could send the US economy reeling."
First of all, investors don't "hit" trading floors any more than you or I do but, that annoyance aside, this is another scare story that makes no sense. Like lions on the loose in obscure country villages, it may make headlines, but it should not cause sleepless nights to anyone who doesn't spend too much time on the wrong websites (put the internet down, sir, back away slowly).
The "fiscal cliff" is a $600bn package (other scary numbers are available) of tax increases and spending cuts due soon. The Democrats don't like the cuts, the Republicans are just mad – mad – about any hint of tax increases.
The government will be in deadlock! The deficit! Etc.
The US government finances will spin out of control (again) and the world's leading nation will go bust, after which so will we all.
Take a deep breath because I bring good news: none of this will happen.
The debate about the cuts and the spending will be public and vociferous, almost as if a fully functioning democracy were behaving exactly as it should. Then a deal will be reached, amusingly close to what we shall pretend was the "last minute" for everyone's lives to continue as normal.Before and after this, the worriers will bang on about US government borrowing being "out of control" and predict total disaster, any day now.
An alternative way to look at it is this: Government debt is not like credit-card borrowing. If it were we'd have been in trouble long ago.
There's no particular expectation that America will ever pay its debts off, the question is whether it can service them (easily).
New borrowings will pile on top of old ones, and the American economy will keep growing to cover the debt. China will keep buying US Treasuries at almost whatever rate is needed to keep American consumers buying its manufactured goods.
It might prefer not to, but it can't pull the plug, not least because to do so would crash the value of its US-heavy investment portfolio.
All of this is a confidence trick, if you like, but when it comes to America, there are plenty of reasons to be confident. For one, it just re-elected the smartest, most able President of our lifetimes. Whatever happens to the rest of us, America will be fine.
- 1 Home Office says Nigerian asylum-seeker can’t be a lesbian as she’s got children
- 2 What happens to your body when you give up sugar?
- 3 Drugs Live cannabis trial: Hash is less harmful than any other drug, expert claims
- 4 Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
- 5 Apple and Google users being spied on for a decade because of 'Freak' security flaw
The City of the Monkey God: Archaeologists claim to have found city lost for 1,000 years in remote Honduran jungle
Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
Japanese island overrun with cats after population explodes
Bubonic plague-carrying fleas found on New York City rats
London property boom built on dirty money
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Durham Free School: 'Creationism taught at' free school facing closure
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...