Greece is just the beginning of the sovereign debt crisis | Eastern North Carolina Now

    Determinism is defined as follows: The philosophical doctrine that every state of affairs, including every human event, act and decision is the inevitable consequence of antecedent states of affairs. (http://www.answers.com/topic/determinism) In short, decisions that are made in the present affect options available in the future. This is important because, since the end of WWII, the entire world economy has become increasingly dependent on the credit quality of the United States.

    Since the United States had proven itself as a legitimate manufacturing powerhouse during WWII, the ability of the U.S. to produce its way out of debt seemed, at that time, unquestionable. Consequently, countries with trade surpluses were more than happy to hold those surpluses in United States dollars, since it was, and still is to some extent, the most stable currency in the world.

    Since 1971, fiat currency systems have allowed legislative bodies throughout the world to avoid making difficult decisions by giving them the option to subsidize struggling industries and citizens through the invisible tax of inflation. Printing currency became as easy as flipping a switch.

    Over the past 40 years, since the collapse of the Bretton Woods system of currency valuation (The Gold Standard), the U.S. dollar became the world's reserve currency. The world will live to regret that decision.

    U.S. lawmakers, drunk with their newfound power, printed more and more currency, while selling treasury bonds to foreign governments to fund a rapidly expanding federal government. With this, the introduction of deficit spending as a sound financial doctrine was born.

    Unfortunately, in order to service the growing debt (make interest payments) the United States must realize a positive return on the capital, printed and borrowed, minus the interest payments. This has not been the case.

    So here we are, 40 years later, with an absolutely decimated manufacturing sector, technologically behind to frontrunners China and India, a near 20-percent real-unemployment rate (U-6 Unemployment of 17.2 percent, source: U.S. Bureau of Labor Statistics), a financial sector that is in shambles (its only saving grace being the legalization of fraudulent accounting--see the redaction of FASB 158), and consumer debt at absolutely unsustainable levels.

    So, what does all that mean, you ask? It means that the credit quality of the United States and, consequently, countries that rely on the U.S. consumer or hold large quantities of U.S. treasuries is rapidly deteriorating. Our ability to produce enough to service our debt, without making gigantic sacrifices that will certainly impede our ability to grow our economy in the future, is seriously in question. As the old adage goes, "When the United States sneezes; the world catches a cold."

    This is especially true today since world markets are more interconnected than ever before, as evidenced by the reaction of all markets to the turmoil that occurred in the United States financial sector from September 2007 through March of 2008.

    The choices we, as Americans, have made over the past 40 years have certainly limited the options available to us today to fix this problem of the runaway inflation of our fiat currency. Our creditors are beginning to shy away from our debt and our people have lost faith in the government's ability to responsibly manage its finances.

    So here we sit, waiting for the final shoe to drop or the first domino to tilt too far. Our options become fewer and fewer with each irresponsible decision leading us further down the path to oblivion.

    Sound currencies the world over are a friend of the people. Unfortunately, at the present, the people have no friends in the realm of currency. That has to change, soon.