Foreign Investment in U.S. Treasury Bonds: Due to the decline in the US economy, holders of U.S. bonds think it is better to invest in their own countries. Countries like China and India now have an affluent middle class that patronizes products from their own countries. Most US exported goods are usually out of the reach of the average person and are bought by the rich middle class.

Foreign Investment in U.S. Treasury Bonds

Now the middle class is not all that interested in buying or acquiring American products, especially cars since these products have lost their prestige and appeal because of other equally good or better products being made and exported by European and in many cases the Asian countries themselves. To earn the best grades in your Dissertation, Thesis, and college assignments you should choose an academic writing service that will meet your best writing needs.

There are some positive aspects of a weak dollar such as the increase in export, but when the government debt spirals out of control, it slows down the economy which means that fewer goods are produced and more goods are imported which does not help the American economy.

International Monetary Fund official

According to a senior International Monetary Fund official, in the case of a U.S. debt default the entire global economy will be negatively affected, Stock markets crash in many countries is a distinct possibility that will add to the problems of the recession that most of the world is currently undergoing. More damaging could be the failure to raise the debt ceiling which could cause a default in most economies increasing ambiguity in a still-shaky global economy.

Although the U.S. can probably sustain a short economic shutdown, a prolonged one will seriously impair the financial system leading to the collapse of the global economy. A major portion of the operations of the U.S. government was shut down completely after the Senate could not reach an agreement on government spending at the start of the new financial year.

Republicans are not approving even a temporary spending bill unless there are radical changes in Obama’s 2010 health care law. Both parties are imposing conditions for increasing the government’s $16.7 trillion borrowing thresholds. The concerns about the U.S. economy are more serious than just a debt default because IMF’s economic motivation plans could be put in jeopardy which will be a challenge to financial stability in several developing countries all over the world.

International Monetary Fund

The passing of the spending bill by Congress will be a vote of confidence that the U.S. does not need any support to stand on its own. The International Monetary Fund has reiterated that the recovery of the U.S. economy will have a positive impact on the world economic situation but the probable threat to global constancy could be the long-term increase of interest rates.

The International Monetary Fund has strongly advised the Federal Reserve to announce its plans for reducing the stimulus. The process of bringing about global financial stability could be complicated because this would cause an increase in both interest rates and market unpredictability.