Graduate-Level Economic Question - Essay Example

The outlook beyond 2012 is positive, where investments from the EU, Japan, China, etc resume, and banking hubs like HK and Singapore resume expansion in developed economies.The deficit shall continue to increase for the foreseeable future. The government is printing like never before to keep the impact from its citizens. Due to this huge unsupported cash in the economy, the result shall be a hyper-inflationary trend that shall fuel an even tighter control on spending from consumers. The result will be a sudden loss of the US dollar’s purchasing power, causing other countries to exit long term treasury bonds to safer pastures (Williams 13).

As soon as that happens, the bottom will fall out of the markets, as the others’ fear of American collapse will not fuel the support to the dollar, as the US shall have internally made it’s currency worthless. Federal reserve Policies will focus on a sustained purchase of gold to back the huge amount of dollars not backed by any assets, thereby causing gold to soar, and therefore become unaffordable to America itself. The feds will have to raise interest rates to protect the dollar, causing a further slowdown in demand (Williams 16).