Have you encountered any sites warning of an impending economic catastrophe in the United States? They typically begin by claiming that the U.S. debt is unpayable, the currency is overvalued, or that the Federal Reserve is creating money out of thin air. Some people fear an economic catastrophe in 2022 because of the coronavirus epidemic. These claims are all correct, but you shouldn't take them too seriously.
Some predict the economy will crash if something happens, like China selling up its dollar reserves or the United States defaulting on its debt. However, you won't learn that these scenarios are extremely improbable. 'Just in case,' they advise you to stock up on gold coins and their survival guide.
What Would Happen If the U.S. Economy Collapsed?
Although the original COVID-19 breakout in March 2020 caused shockwaves across the markets and economy, a near-collapse of the U.S. economy occurred on September 16, 2008. The Reserve Primary Fund's holdings "broke the buck" on this day, meaning their value fell below $1 per share.
When investors panicked, they pulled billions of dollars out of money market accounts, where many firms store their cash reserves for operating expenses. The Federal Reserve and the United States government had not stepped in to stabilize the banking system.
Is a Collapse of the U.S. Economy Possible?
A total economic meltdown in the United States is quite improbable. The government can take swift action in times of crisis. As shown during the 2008 financial crisis and the COVID-19 epidemic, the Federal Reserve may deploy contractionary monetary measures to control hyperinflation and coordinate with the Treasury to provide liquidity.
Since the Federal Deposit Insurance Corporation protects financial institutions, a collapse of the banking system on the scale of the Great Depression of the 1930s is quite unlikely.
What If the U.S. Economy Crashed?
There is a good chance that you wouldn't have access to credit if the U.S. economy were to crash. Eventually, financial institutions would shut down. Food, fuel, and other basics would be in short supply. It's possible that water and power won't be accessible if the collapse affects local administrations and utilities.
If the United States economy were to collapse suddenly, it would cause widespread fear worldwide. There would be a dramatic dollar decrease and U.S. Treasury bond demand. The cost of borrowing money would rise.
Reasons Why the U.S. Economy Won't Collapse
Even if the U.S. economy falls into a serious recession or depression, this is hardly the world's end. There are ten solid arguments against its collapse.
Declining Joblessness
According to data collected by the U.S. Bureau of Labor Statistics, the unemployment rate reached 14.8% in April 2020. (BLS). While this is not as bad as some had feared in the early days of the epidemic, it is nevertheless the greatest unemployment rate since the Great Depression. Thanks to the ongoing distribution of vaccines and companies' efforts to ensure their employees' safety, many of these people are gradually returning to the workforce.
Investors' Confidence Is Growing Again
The market reached record highs, only to plunge in 2020. The peaks reflected a general feeling of optimism among investors. The lows came about because of the epidemic's widespread fear. Uncertainty has gradually diminished, allowing the market to rebound.
The Economy Is Not On The Verge of Collapse
Limits on the size of the national debt in the United States are scheduled to be reached in August 2021 at the cost of $28.4 trillion. Government spending in response to the outbreak boosted that figure higher. 4 The debt limit was raised by Congress in December 2021 by $2.5 trillion, bringing the total to over $31.4 trillion. The debt to GDP ratio is high, but it is not yet high enough to trigger a financial crisis.
U.S. Debt Will Not Cause a Default
Most senators and representatives know that a debt default would severely damage the United States' standing in the international financial system. A minority of tea party Republicans in Congress threatened default during the 2011 and 2013 debt limit crises. There is No Reason for China and Japan to Cause a Crash
China and Japan's two biggest markets are the United States and Europe. If the U.S. economy collapses, so will theirs. No matter what the pessimists say, China is not selling all of its dollars. Since 2013, the United States has owed Chinese creditors more than $1 trillion annually.
The Dollar Would Decline, Not Collapse.
Between 2002 and 2008, the dollar's value dropped by 58%. On January 3, 2002, one euro only bought you $0.90. December 29, 2008, has a value of $1.42. As the euro rises in value, the dollar decreases. There was a significant decline in the dollar's value, but it was no longer a collapse.
