Too big to fail !

When the " Great Financial Crisis " hit the world in 2008,  it was decided that a cluster of giant firms that included banks, insurance companies and the world's biggest car manufacturer were just " too big to fail "  .They were bailed out with public money - and in most cases that money has been repaid and they remain solvent.

We are now facing the second " Great Financial Crisis ".    The world's biggest economy is in trouble !
America spends more than it receives in income, and yet the world is happy to keep servicing that debt. Each financial year the amount owing increases by trillions of dollars, but many commodities are traded only in American dollars and the US Dollar is favoured as " the world currency ".

If that mighty dollar is at risk, it would seem likely that it would be because money markets have become skittish about further lending, but that is not the case.   The risk factor is simply a political brawl between two political parties  who seem hell bent on making their views prevail, even if it results in the world's premier economy being forced into de-fault on it's debts.

In the interests of legality, the politicians who form the US government need to agree to lift the debt ceiling to allow more borrowing to pay social security cheques, veteran benefits, pay for the armed services - and the entire spectrum of US employees who keep the nation's economy functioning.

If that pay stops, mortgages will go unpaid - and many people will simply not have the money to buy food. It would be a disaster of tragic proportions, but it would also be an economic tsunami that would engulf the entire financial world.

The money world relies on trust and confidence.   Shatter that - and you have all the ingredients of " the Great Depression " that caused untold misery in the 1930's.    America may be acting irresponsibly, but world finance seems content to go along for the ride and there is the expectation that fiscal discipline will kick in eventually - and we will all have a " soft landing ".

The problem is personal egos are forcing brinkmanship duels that are taking these issues to a knife edge.  We are seeing less of senators and members of the house who are prepared to compromise and more of hard liners who have abandoned loyalty to their country in preference to partisan ideals.

If both sides of American politics don't back away from the edge they may inflict a wound on the world that will deliver no winners.   It only takes a tiny match to ignite a bonfire - and if American politics miscalculates the reverberations will be terrible.

The biggest danger is the notion held by many American politicians that somehow the American economy is too big to fail - irrespective of what decisions they make.

If history proves them wrong - we all suffer !