Research On U.S. Debt Economy

The United States is the largest economy of the world, its economic development has a decisive impact on world economic development. In the 70s of 20th century, the U.S became a net debtor, then the U.S economic shown the characteristics of low savings and high consumption gradually. Because there are much of borrowings in the consumer expenditure, so we called the U.S economy "debt economy". As U.S economic growing and fluctuating, U.S debt economy has become a hot issue that both scholars and policy makers concerned. There are five sections to introduce and analyze the U.S debt economy in this thesis.In the first part of the thesis,the relevant research of scholars from home and abroad is outlined, the theoretical and practical significance is summarized, the ideas and structure of this paper are introduced, the main viewpoint of author is also given.The second part of the thesis is the analysis of situation and performance of U.S debt economy. First, the formation of debt economy is discussed, debt economy originated from the fact that total investment is greater than total savings,the savings rates of the world's four major economies (includes the United States,Japan, Germany and China) are compared. In details, debt of the U.S includes household debt, government debt and corporate debt. Household debt is the largest proportion. Household debt is comprised by home mortgages and consumer credit, America's housing policy and housing market booms have driven the expansion of the size of mortgage loans;auto loan and credit card spending account for the major proportion of consumer credit. The analysis reveals that American families have a high propensity to consume,and the average propensity to consume has relevance with household debt accumulation. Regarding of government debt, fiscal deficit of U.S is outlined, and the fiscal deficit is owing to federal government policies and soft budget constraint. With the expansion of fiscal deficit, as a mean of deficit financing,size of government bonds has also been expanding, and accumulated a large amount of government debt. Regarding of corporate sector's debt, by analyzing the means of financing for U.S.companies, this paper introduce an overview of corporate debt, and point out that growth of corporate debt is impacted by economic cycles.The corporate sector's debt ratio is relatively stable, while household debt has increased rapidly.The third part of this thesis analyzes the conditions or reasons of debt economy could generate and continue.Debt economy is due to three reasons:International monetary system that dollar standard; developed financial markets of the United States; Capital inflow from countries that have trade surplus.First of all, dollar standard make the United States a financial country, and others evolve into trading nations;the dollar's status give U.S.the ability that other countries could not have:on the one hand, the United States meet domestic consumption demand through importing goods from trading countries, on the other hand, U.S.can obtain financing through the issuance of bonds and financial products, making U.S.dollars back. Second, developed financial markets created a large number of financial derivatives and investment tools, as a result of wealth effect, wealth of the residents continue to add value, finally the residents have a convenient way and at a lower cost to achieve consumer finance.Third, surplus countries get a lot of dollar reserves,in order to prevent depreciation of the dollar, these countries inject capital to the United States in turn. So U.S.received a lot of capital inflows.In this way, U.S.debt economy achieved an international cycle.In the fourth part, the author pays attention to the benefits and costs of U.S.debt economy. In the short run, debt economy stimulate economic growth through consumption, but in the long run, Debt economy will surely have a heavy price, and the impact of the debt economy is global in nature.The analysis from long-term perspective mainly involves four aspects:First, the debt economy has accumulated a huge debt, government and residents have a heavy debt burden. Second, the structure of economic and finance has been changed:real economy sector declines,industrial hollowing out, the virtual economy spread. Third, the U.S.economy's external imbalances;Fourth, debt economy have impact on the global economic imbalances and other economies in the world. First of all, the debt economy aggravated the debt burden of the United States,worsened the financial situation, which can be reflected by the U.S.household debt income ratio,the number of bankruptcy cases and government budget deficit scale.Secondly, structural imbalance of economic and financial has occurred, physical economic output declined. The United States has accumulated a large current-account deficit. Finally, the debt economy is the principal reason of global economic imbalances,make its trading partners vulnerable.Based on the analysis of U.S.debt economy, the fifth part of this thesis discusses whether U.S.economy could continue. In addition to its adverse effects,the author focuses on the changes of main support of debt economy. This includes three aspects: the solvency of the United States itself; the international monetary system reform; change in the attitude of foreign countries to the United States.Through the analysis, the authors believe that the U.S.debt economy's major support is no longer dependable, the United States'liquidity is doubtful;although difficult, other countries will continue to spare no effort to promote international monetary system reform; overseas will not willing to serve as hostages of the United States.That is why the U.S. debt economy could not continue in the long term.