The United States and its transnational financial arm, the IMF, are outraged by the public debt of many nations, Argentina among others. They insist on fiscal discipline, on not spending more than is possible or distorting exchange rates. But these seem like demands only for third parties.
The United States exceeded the maximum limit of issuance of public debt in January and, since then, extraordinary measures have been implemented that allow it to comply with its obligations. There is a debate surrounding the 14th Amendment that was added in 1868 to the Constitution, which imposes that “the validity of the public debt of the United States, authorized by law […] should not be questioned.”
One sector emphasizes that the debt limit set by the legislature should not be exceeded because the law would be violated, while another emphasizes that failure to comply with spending obligations could be an even greater violation of the Constitution.
Analyzing the historical background on the resolution of this dilemma, it is most probable that the debt limit will be increased, so as not to break the law. The relationship between public debt and GDP in the United States was 40% in 1980, 60% in 2000, 95% in 2010 and exceeded 120% in 2021, according to information from the World Bank.
In this sense, they are great constitutionalists, although judge Rosatti may not notice it.
In case of increasing the indebtedness limit, there would be a temptation to reason that “At home blacksmith, wooden knife”. Although perhaps today the northern nation is not the industrial blacksmith and gold holder as it was at the time of the Bretton Woods agreements in the middle of the last century.
Debates since Bretton Woods
The British proposal at Bretton Woods involved the creation of an international payment clearinghouse, which would issue an international currency linked to the main national currencies and exchangeable for local currencies at a fixed exchange rate. At least in an initial stage, the nations with surpluses would finance the deficit ones.
The great creditor of the time, the United States, rejected the proposal and imposed the gold-dollar standard, which it broke unilaterally in 1971 due to the attempt by France and Germany to exercise the right to deliver dollars and, in exchange, receive bullion. golden. At that time, the European nations confirmed that not all that glitters is gold.
Since then, America’s specialty is being the world’s leading exporter of debt, appearing to drop dollars around the world from a helicopter, Friedman would say, falling like manna from heaven, Patinkin would think.
He has held this position at gunpoint. And some more weapons. In 2011, the head of the IMF was the French Strauss-Kahn. He promoted the gradual process of the use of Special Drawing Rights (SDRs) as the main world reserve currency, incorporating other national currencies from emerging countries, with the aim of gradually replacing the hegemony of the dollar. So it was, neither Chinese nor Russian – French. A few days later, he resigned due to an accusation of sexual assault against a waitress at a hotel where he was staying at the time of this debate. According to him, there were relations with consent. For the purposes of this article, it should be noted that, with his departure from the organization, the proposal regarding the SDRs and the dollar did not prosper.
The debtor in debt
According to the Institute of International Finance, the world debt of nations and companies continues at levels that far exceed 300% of world GDP. Of course, most are in dollars.
In this regard, requests for devaluation or an increase in the exchange rate by the IMF and powerful local groups are not neutral: “The external public debt burden of many developing countries worsened due to the strong losses of local currencies (in 2022) against the dollar,” sentence the report.
javier milei, who proposes that the dollar be legal tender in Argentina, should take all this information into account and not take it as a joke. A popular joke indicates that there are no coups in the United States because there is no US embassy there. Today, it could be said that the United States does not receive certain demands because it does not have an agreement with the IMF.
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