Imagine an 18-wheeler speeding down the highway, going faster than any other vehicle. The truck is self-sufficient to a point, but not enough to run it completely. So the truck borrows fuel from the surrounding vehicles to keep going faster. The driver promises to stop further down the road and make enough fuel to pay back the other vehicles that it borrowed from. But the truck doesn’t ever want to stop, it just keeps going faster and faster. The truck has been pushed to the point that its safety systems like the brakes can’t work properly. The only things that can slow it down are natural forces that are out of the driver’s hands.
The driver is aware of this problem, but the road ahead seems to be straight for miles. It doesn’t seem like the road will ever turn so he presses his foot down on the accelerator and keeps going faster. After a long while the driver sees a turn in the road. He tries to brake but he realizes that the brakes were gone a long time ago. The driver now has to prepare to take the turn going extremely fast. The chances of making the turn are slim, but there’s no time to way the chances anymore. As the driver stares down the turn, he begins to wonder how fast he will be going, how he will have to turn the wheel in order to avoid tipping over, and what he will do if he doesn’t make the turn.
Now imagine that the truck is the United States economy and the driver represents the mind of the average American for the past 60 year or so. As a country we have almost always had a high demand for all kinds of goods. A high demand for products also comes with a high price tag. America generates a large amount of money every year, but between promised money to its citizens and required spending on various government programs there is a large gap in our funds every year. This gap needs to be filled, and who better to fill it than other countries around the world.
In addition to borrowing money from other countries, we are also purchasing a lot of products from other countries, which is called importing. If we were producing more of our own goods then our money would stay within our borders and it would be easier to get the money together to pay off our debt. But because our money is also going to the countries that we borrow from, we are left with a problem. The question now is why we import so much. The answer is simple, imported goods are often cheaper. Because wages and production costs are lower in other countries, companies can sell their products cheaper. This keeps the demand high, especially with Americans. When you’re a company that enjoys buying so much we often take the cheapest price.
China is the most commonly used example because it fits the stereotype very well. As my History teacher informed me in an interview, “One of the complaints that the US government has regarding the Chinese government and the Chinese currency is they keep it artificially low" (Blanchard). Because their economy has been strengthening at a steady rate in the past twenty years their currency value should be a lot higher than it is. Keeping it low is very beneficial for China because it keeps their prices down. As long as this is true, Americans will keep buying their products. If China could increase their monetary value then we would be able to keep more of our money in-country to strengthen our economy. The Chinese believe that increasing their monetary value would cause some instability within their own economy. With solutions like this right in front of us, we still are faced with the choice of defaulting on the loans that we've borrowed. “If we default on
our debt, which I think is possible, would hurt lots of people, not just the
Chinese. Lot of Americans who own treasury bills would not get paid” (Blanchard).
Up until fifth grade my view of a dollar was that it had an indefinite value; one dollar was equal to four quarters, ten dimes, 20 nickels, or one hundred pennies. My teacher, trying to explain how the value of a dollar could change over time, presented me with a graph that showed the value of one United States dollar over a twenty-year span. It took some time for the meaning of the line to set in. After I learned about this changing value my entire concept of our monetary system changed. I began questioning whether or not something like the Great Depression could happen again. The first time I was taught about the great depression my opinion was that it was a one-time event, a bug in the system that had been fixed for good. It wasn’t until the beginning of my high school career when I began questioning why it happened. The answer to the question of what happened is an easy one, but why it happened is more difficult to explain to a young student. Nevertheless my teacher tried and partially succeeded. I then asked the question of why there was no way to stop the fluctuations in the value of a currency.
I’m sure that if there was an easy answer to my question, my history teacher would have told me, but she did not. I was beginning to form an understanding that the value of a dollar could easily be placed on a graph like ocean waves rising and falling. As a young student that likes to simplify things, I could imagine a solid horizontal line cutting across the graph down the median value of a dollar throughout the years. I wasn’t imagining it for any mathematical purpose. I had established in my mind that it couldn’t be impossible to bring the value of a dollar to this stable line and hold it there indefinitely.
These days it’s known throughout the world that America isn’t all too great with handling money. The country has been in debt for many years and the numbers have only been rising higher and higher. In previous years this bowlder of debt has been hanging by a very thick rope, but with that rope getting thinner and thinner over the years, we are faced with a decision; do the leaders of America fix this problem now or hand it down to the next generation. That’s what all the previous generations have done. In the past governments have promised to do a few things to help slow down the spiral that our country is caught in. Even with these promised adding up to a rather minute effect on the economy, most of them have never been completed so the effects have been even less. Soon enough the next government officials are elected and it’s their problem.
This has been going on for generations. Only now is the serious search for a solution to our economic crisis being searched for. Still, some problems stand in our way. The book Freakonomics says, "Even widespread societal gains inevitably produce losses for some people" (Levitt 2005). However, as a wise man once said, “This time, rather than talking about the problem, we’re talking about solutions" (I.O.U.S.A. Solutions). The only question now is, are we too late?
