After 300 Hundred Years, Representative Democracy is Imperiled
"The
representative democracy under which we live was born three centuries ago
around a simple idea: to avoid a debt spiral and bankruptcy, public finances must
be controlled by representatives of the people and not left to the discretion
of the king. Today this founding mission is no longer being successfully
carried out in the U.S. - long considered the model representative democracy."
In downgrading U.S. public
debt for the first time in 70 years, Standard & Poor’s has upset global
finance. And beyond that, it has disrupted the economy and even politics. Global
finance is built on a simple idea: the debt of the United States is 100 percent
secure. All financial products are defined by differences in interest rates - and
therefore risk - in relation to U.S. federal debt obligations. Of course, the
rating isn't gospel. It’s just one piece of advice among others. But it
proclaims one truth: America cannot continue to forge ahead with a gargantuan
public deficit (more than 10 percent of U.S. GDP) and minimal growth (less than
1 percent in the first half of 2011). For the first time in over two centuries,
it may not be able to repay its debt. With S&P's announcement, bankers, insurers
and investors the world over can no longer close their eyes to this disturbing
reality. They will have to review all policies of capital allocation, a
movement that will make trillions of dollars dance over the weeks and months to
come - the Chinese already expressed their fury. Regulators too, will have to
go over their calculations. Money will inevitably become more expensive - even
if, initially, many investors have the paradoxical reflex to buy U.S. public
debt to protect themselves from market turbulence, which at first may contain
American interest rates and thus reassure the short-sighted.
Posted
by WORLDMEETS.US
But finance is not the only
entity that was shaken. Since public debt is the cause, so are the politics
behind it. The representative democracy under which we live was born three
centuries ago around a simple idea: to avoid a debt spiral and bankruptcy, public
finances must be controlled by representatives of the people and not left to
the discretion of the king. Today this founding mission is no longer being successfully
carried out in the United States - long considered the model representative
democracy. And, in our Old Europe, doubt is growing about the capacity of States
to bear their financial commitments, as we saw on the markets last week. Political
leaders repetitively dole out reassurances, but are losing their credibility
bit by bit as public debts grow. To win back confidence, deeds and not words
are needed. At stake is not just the health of financial markets, but the
future of democracy.
