A Xinhua commentary cautioned about the possibility that the U.S. may default on its debt. The article said, “No one wants to see the U.S. breach its debt obligations, but (everyone) has to be prepared (in case it happens). As long as no one can shake the U.S.’s (global) hegemony in military, currency, and media, any U.S. ‘action to repudiate its debts’ will benefit itself at a cost to others.” “In the current situation, only by ‘repudiating its debts’ can the U.S. rapidly decrease its debt ratio and reduce its heavy debt burden, so as to have ‘consumption recover.’”
The article argued that, in the short term, the U.S. cannot expand its economy through investments or exports. “In the short run, the U.S. must continue to walk the path of ‘relying on consumption’ to improve its economy. In fact, the Republicans, the voice for the oil and financial conglomerates on the East Coast, are very aware of the reality. Therefore, they are not afraid of the U.S. defaulting on its debt, and have even proposed a ‘technical default.’”
“The world’s countries will have nothing to say but acknowledge their bad luck if the U.S. ‘defaults on its debt’ or ‘engages in disguised debt default’ in order to reduce its fiscal deficit. If the default causes the collapse of bond prices and the skyrocketing of commodity prices, those who suffer will be countries with foreign exchange reserves and industrial manufacturing countries. To avoid their capital loss and remedy their economies, these countries will have to unconditionally agree to the U.S debt restructuring. Historically, the collapse of the Bretton Woods system was a typical case of the U.S. ‘repudiating its debt.’ This is also why the author worries about the ‘U.S. repudiating its debt.’”
Source: Xinhua, July 7, 2011
http://news.xinhuanet.com/world/2011-07/07/c_121635675.htm