When former Lebanese Prime Minister Hassan Diab announced, on March 7, 2020, that his government had stopped paying Eurobond debt, which amounted to about $32 billion, Lebanon lost “the trust of the world” as a result, its banking sector collapsed, and its national currency deteriorated until it exceeded the exchange rate Beirut’s dollar is 21,000 pounds, and the size of its economy has fallen from 54 billion dollars to less than 22 billion dollars.
This happened in a small country, one of the smallest economies in the world. But what would happen to the United States, and to the world’s largest economy, if the Washington government stopped paying its debts? Treasury Secretary Janet Yellen has repeatedly warned that the US could default if Congress failed to raise the $28.4 trillion debt ceiling by next Monday (October 18). Even President Joe Biden told bank and corporate officials of the need to avoid the “economic catastrophe” that could result from the world’s largest economic power defaulting on its debts.
It was noted that despite the seriousness of these warnings, American lawmakers did not respond to raising the debt ceiling as requested by the White House, but rather the Senate approved a temporary delay for 45 days in the amount of $ 480 billion, allowing the Treasury to meet its obligations until December 3, With a very small majority and with broad opposition from the “Republicans”, knowing that more than a quarter of the American debt, or about 8 trillion dollars, was owed to the Treasury during the rule of former “Republican” President Donald Trump.
Thus, the crisis will return again with the increase in the size of the debt, and the US government has no solution but to continue borrowing, since other options are limited in effectiveness, such as increasing taxes or reducing expenditures. Coincidentally, this reality applies to Lebanon’s financial crisis, where the public debt has exacerbated and accumulated to more than $100 billion, and the government is forced to borrow in order to meet its obligations. But what do you do when you lose the world’s trust in her because she stops paying, and finds no one to lend her? It resorted to printing more cash until the money supply swelled from 5,000 billion liras at the end of 2019 to 45,000 billion liras last June, which contributed to the deterioration of the value of the lira against the US dollar. If it is universally known that the strength of money stems from the strength of the economy, then the political influence, in turn, is reflected in the money.
Thus, the dollar has become the most important global currency, and it provides Washington with a great financial and political influence that can be used in economic wars, and as a pressure force in military battles… through the spread of its circulation in most countries of the world and its control over the financial and economic movement, as the demand for it increases and therefore its quantities increase. printed, which the financial markets absorb, especially since everyone who owns money, deposits, or instruments in US currency, from central and commercial banks and individuals, is obliged to protect the dollar to protect his interests. However, it seems that all this strength and its repercussions do not hide the risks of an exacerbation of the US debt, which is the largest among the countries with the highest credit rating.
International agencies expect it to exceed 130 percent of GDP this year, and to rise to 202 percent in 2051.
A Lebanese writer specializing in economic affairs
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