The markets have tumbled again this last week and this should come as no great surprise, the USA is still effectively bankrupt. They’re still borrowing huge amounts just to keep cash flowing but fundamentally the US Govt needs to stop spending and start paying.
Fundamentally it’s fairly simple: government finance is, in many way, just like a household, you can’t continue borrowing bigger amounts forever. Unless you continually increase your income you’ll eventually run out of money to keep up the repayments, or the lenders will decide that you’re unable to maintain your position and start asking for payback. The US has had it’s credit rating downgraded (meaning that they’ll pay a higher rate of interest on what they borrow) and that’s just the beginning. The markets know it and are reacting accordingly.
If they don’t get to grips with it the markets will eventually realise that (underneath the well-polished political veneer) Uncle Sam is in as bad a shape as Greece, with an increasingly high proportion of GDP being taken up by interest payments on debt. At that point no amount of political wrangling will get them out of the hole, the world’s biggest debtor nation will be held to ransom by their creditors and the dollar may lose it’s position as the world’s reserve currency ( this would destroy the US economy but is the absolute worst case scenario).
Sadly it’ll be ordinary Americans who pay the price, the political elite have done well to fill their own pockets by mortgaging the future wealth of the country. Tony Blair and Gordon Brown did very similar in Britain but have been exposed, something that American voters should be calling for at home.
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