Countries around the world are facing a dramatic recession, which is forcing them to spend capital they do not have. There are few sovereign states immune to the financial deficit that seems to even plague world super powers, such as The United States. This is unnerving due to the power and influence that the United States holds on the world stage. No matter how frugal the future budget may be and regardless of future financial success how will the United States overcome a deficit of 14.7 trillion dollars? Regarding this harsh reality there are two factions, one which believes the deficit is a necessary evil. The other believing that a deficit so large can be nothing but malignant to the contentment of the American common welfare. The National debt was not accrued in one night, it is the product of many years of a government that has difficulty abiding by a budget that is consistently growing.
National debt is the accumulated amount of money which is owed by the federal government.
To decipher the national debt, one must sum up all the U.S. deficits accumulated throughout the nation’s history, including even the most minuscule amount of surpluses the U.S. had and growing interest on the net borrowing. The result will equal the national debt (Rich). If the United States debt were to be broken up into a pie chart, the largest portion of debt would be owed to the Federal Reserve System commonly known as the Fed, the other portions would be dispersed among foreign governments, private individuals and corporations.
The Federal Reserve System is the central banking system of the United States. In response to a chain of financial panic the Fed was created along with The Federal Reserve Act in 1913. The Federal Reserve Act is the Act of Congress that created the Federal Reserve System. The Federal Reserve Act gives the Fed legal authority to print legal tender in the U.S. The Fed was originally created to prevent the supply of money and credit from dissipating. In the United States today the Fed controls monetary policy. Monetary policy is the process by which the monetary authority of a country, controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability (Unknown). When the United States is smitten-ed by debt the Fed has the ability to lower interest rates. When interests rates are lowered, it encourages people to acquire loans and make acquisitions. The short run effect of this cycle can be positive, the long run may not be as positive. When handled erroneously the long run of inflation will be negative. In the short run when people secure loans, the loan enables the person purchasing power, which may help their finances. If the individual receiving a loan does not financially dispense their loan wisely, that individual can be in a arduous financial problem. A dire financial problem can be the possibility of becoming bankrupt, which leaves the person in a situation that is extremely...