Economy of United States of America

The biggest economy of the world; economy of USAliabilities in foreign exchange. USA has got external
with more than 14 trillion dollars, around 23% of theliabilities of around 13.4 tn dollars, the amount of Foreign
world GDP. We can think of the effects on the rest ofDirect Investments at home is 2.4 tn dollars and the
the world on having a plunge in the USA economytotal amounts to 15.8 tn dollars (Liabilities side of
with the recent sub-prime crisis. This country is knownBalance Sheet). The amount of forex reserves it has
for its entrepreneurship with huge amounts ofaround 78 bn dollars, the amount of foreign direct
investments flowing to rest of the world. The rapidinvestment by USA in rest of the world is 3.3 tn dollars
development in industrialization & technology in theand the total amounts to around 3.4 tn dollars (Assets
past some decades lead it on the forefront of theside of Balance Sheet). Net amount of forex liabilities
world.on head is 12.5 tn dollars which is about 87% of the
 GDP.
During 1970s when the Gold system and Bretton 
woods systems came to an end; fiat system hasEven the domestic growth and markets also hindered
come into force where the printing of money is notwith huge amounts of domestic credits about 15 tn
supported by any underlying assets. Still there aredollars; more than the GDP. Let us have a small
some world famous economists who are against thecalculation of the different components of the GDP
fiat system of money printing where there is no basevalue of 14 tn dollars. Agriculture, Industry &
for money printing and explicitly dependent on theServices forms 1.2%, 21.9% & 76.9% of the GDP
markets and solemnly at the decision of the govt. ofrespectively. The labour cost or service cost of the
the countries.west like USA & Europe is highly inflated as
 compared to the Asian countries. The same level of
Even after this system collapse, all the rest of theservice can be rendered in India or China at 1/3rd cost
countries started backing USD as a reserve currencywith same level of expertise due to huge surplus
and a tiny part in gold to back up the printing of theirmanpower. If we calculate these services in the GDP,
currencies. All the international transactions wereit comes to around 10.8 tn dollars. If we compare with
mostly in the USD. This lead to more than half of thethe Asian cost of services it would equivalent to 3.6 tn
world forex reserves in the form of USD currencydollars roughly. So as per the basic workings the total
and government bonds.GDP comes to around 6.8 tn dollars.
  
Is United States of America strong enough to coverWith this level of GDP can it sustain the external debts
the money i.e. currency whatever it is printing and theand can it make justice to the overseas countries
quasi money i.e. government bonds it is issuing? Whatwhich are holding USD as reserves? The same story
would happen if rest of the world starts dumping thegoes for Europe too. By ignoring these fundamental
USD reserves in the global markets? Is the Americanthings we are leading towards the false globalization
economy strong enough to control or capture all thisand growth. It forms a huge bubble in the world
reserve currency?economic systems and the global financial systems
 going to change entirely in the coming decade.
Apart from this, USA has got huge short fall in the 
trade balance which led to a massive amount of forexLet us not forget the fundamentals.
liabilities. Let us have a small calculation of USA's