US │ Will it default?

Probably, and hopefully, the US won’t default. Surely there are enough sensible heads among the members of the Congress to realize that defaulting is not the optimal policy for the US. One suspects that there is a lot of posturing with an eye on the presidential elections next year, than wishing to cause an economic implosion whose effects would be far worse than that of the credit crunch we have seen so far. Yet the vitriol and intransigence of some sections do worry people looking at this from the outside. The US politics, society and people seem to be deeply divided, precisely at a point when they need to be united.

The economy in the US, and elsewhere, has not recovered in a way that politicians had promised and people had hoped. The problem is not so much what has been prevented, but what hasn’t happened. There was a danger that things could have gone much worse than it has done, had policies such as printing money quantitative easing not taken place. The problem was that these policies promised much more. The policies were put in place promising a path back to prosperity, but instead many countries are stuck in a quagmire.

The current debates on debt ceiling seem like a part of a debate on retrenchment. The economy will remain the top priority whoever becomes the next president, and perhaps even one after that, especially in the broader context of the relative decline of the US power vis-à-vis China (and others such as India and Brazil). President Obama is unfortunate to have won the election at the time he did: even though he commands a huge amount of respect abroad, that could not be said within the US. I have a feeling that the US will become more isolationist, and will retrench instinctively, irrespective who the next president will be, when it most needs a ‘forward’ policy, not militarily, but diplomatically, to retain its influence in the world. President Obama probably has the intellect and the temperament to lead the country through this tricky transition, from the point in history where the US is the undisputed economic and military superpower to a far more complicated world. The American people, however, probably don’t want to go where he needs to take the country.