The United States has been known as a powerhouse throughout the world and as having a good reputation with other countries. With the deficit, surplus and a high debt has caused the United States to lose some of its stature on an international level. The national debt has three parts concerning fiscal policies, prevailing economic conditions, public policy, and demographic changes. The United States has had annual deficits spending a lot more than the Department of Treasury has collected. This has occurred almost every year since the nation has been around. This is what has established the United States as a preeminent global power that it is right now. ("Financial Regulations", 2012). If the deficit and debts continue in a downward spiral this will have an effect on the strength and status of the United States bargaining power. While the United States could faces inflation, on the international level it could cause the American dollar to depreciate and this would harm the United Stated international competitive power. If this happens the reputation of the United States would diminish on an international level as well.
When the United State is importing goods, an Italian clothing company can reap the benefits. If Italy’s economy is strong enough when the United States runs a trade deficit, an Italian clothing company will continue to grow and produce jobs for the people in Italy. It is opposite if the United States runs a trade surplus, this can cause an Italian clothing company to shut down because the company will not be producing the goods that the United States need. When there is a debt in the United States and a demand for Italian clothing company to import their products, the United States must sell off assets at a lower value to cover the demand of the products. (According to "Research and Data" 2011). If the United States does not have any assets to sell they will have to borrow the product from the company and pay them...
References: St. Louise Federal Reserve, Deficit, Debts and Trust Funds, August 2006)
http://www.investopedia.com/articles/ useconomy.about.com Fiscal Policy
Financial Regulations. (2012). Retrieved from http://www.cfr.org
research and data. (2011). Retrieved from http://www.phil.frb.org
Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin.
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