Crisis averted, but we cannot get complacent and must act

Thank goodness more rational heads prevailed this past week and we listened to what our global financial partners were telling us. I was not counting the chickens until they were all hatched. Here are few remarks from around the globe that we need to remind folks of courtesy of NBC News online.

International Monetary Fund managing director Christine Lagarde welcomed the deal but said the shaky American economy needs more stable long-term finances. The deal only permits the Treasury to borrow normally through February 7 and fund the government through January 15.

After the deal was approved and signed, the Tokyo stock market, the region’s heavyweight, gained as much as 1.1 percent Thursday. Markets in South Korea, Australia and Southeast Asia also gained. Earlier, China’s official Xinhua News Agency had accused Washington of jeopardizing other countries’ dollar-denominated assets. It called for “building a de-Americanized world,” though analysts say global financial markets have few alternatives to the dollar for trading and U.S. government debt for holding reserves.

In Israel, a key American ally in the Middle East, commentators said the fight hurt America’s overall image. “There is no doubt that damage was done here to the image of American economic stability,” Israel’s economic envoy to Washington, Eli Groner, told Israel’s Army Radio. “It’s not good for the financial markets, not in the United States and not around the world.”

The next time someone brings up that it would have been OK not to pay our bills, ask them if they truly understand what they are advocating with folks around the world saying the above. And, just to illustrate this point further, Brazil had some major building initiatives around their growth, Olympics, etc. and they looked to financing from China, Dubai and other non-American sources, so don’t think the world does not notice our dysfunction. With that said, we do need to deal with our deficit (and debt issues) and hopefully the December 13 report by the bi-partisan committee will be fruitful.

In May, 2012, I wrote the following post regarding the Tea Party’s efforts. While I support their push for dealing with the deficit, they are not being very good stewards with the faith some have entrusted in them. In addition to their uncompromising positions and trust in dubious sources of information and history, they are also taking a key lever off the table that we must use to get our deficit under control. In addition to reducing spending, we must increase revenue. It is not an either or issue – it is both as recommended by the Simpson-Bowles (or Bowles-Simpson) Deficit Reduction Committee.

So, Congressional leaders, you have until December 13 to come up with a plan. That plan cannot include holding the debt ceiling hostage or shutting down the government. Please remember, our stability is a rock on which the global economy is based. Please heed the words by the Chinese official above. If we can no longer be that rock, the world will find another one. Innovation is portable as is money. People are investing and will invest elsewhere if we don’t get our act together.

6 thoughts on “Crisis averted, but we cannot get complacent and must act

  1. One writer I recently read emphasized as to how one can’t compare how they run a household with how the govt works. His point is that an average household has a steady, planned stream of income, which the govt does not. Also, there is a means to manually control the payments, which does not exist in the govt.

    A depressing thought about the new budget plan is that two Republican members, including Paul Ryan, are on the team and both hard-line budget cutters. The implication is that the budget agreement might already be DOA.

    Great post

    • Thanks Barney. Good point. There is one thing people can equate to household finance, you do your darnedest to pay all debt and dare not renege. You may lament “why did I buy that?” but you definitely try and pay it off, as the alternative is not great.

  2. the idiots that shut down the government don’t give two hoots about what is being said around the world. this was strictly a political move and I sure hope it bites them in the butt!! I read El Pais(from Spain) and only caught the headline recently that went something like this “we have lost confidence in the way America governs”. yep. Let’s hope we can recover from this latest debacle. The one thing I am pleased about is that Obama did not cave.

    • Thanks Toby. We need to listen to those outside looking in. Remember last fall after the GOP losses, the party wanted to understand why? After some initial reflection, the conclusion was we do not think peope understand our message and doubled down on conservative. The painful truth which some are seeing now, is they understand your message, but find it too extreme. Thanks for your thoughts. BTG

  3. Unfortunately, I fear that those who thing congress should have held out, are the same people who don’t understand the reality of our place in a global economy and what it will mean for this country to lose that hallowed ground.

    • Agreed. This is a key reason I say that many GOP voters are voting against their own economic interests, but have no idea they are. We are part of a global construct and we have to promote trade, innovate, and educate otherwise we will shrink our influence.

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