Consequences of the Debt-Based Money System - Assignment Example

Debt rate always impacts consumers and producers by the change in demand and supply. The implications of debt include: increase in prices of goods and services (transportation costs, manufacturing costs, capitals costs, etc), the low purchasing power of the consumer to buy goods and services at their purchasing power ability, excess supply of products and services in the markets but a very few buyers, increase in the unemployment rate, low wages for the labor force, the excess burden of loans, imports of cheap products, less spending on environmental policies, the high inflation rate in the economy that is a negative turn for the producers, not the impressible role at international trade, rise in exports, the pressure of foreign debts, etc (Greaves, 2001).

By analyzing different reports about the US economy, it is predicted that in case of failed economic policies of a government, the foreign debt can increase by 0.5 percent per year. foreign ownership of US government debt can result in form of a great recession, which influences the fiscal and monetary policies by bringing changes in the markets. Debt problem ever needs proper legislation to solve the economic problems by keeping balance in demand and supply at an equilibrium level. Foreign debts have become a serious cause of the expected high rate of unemployment in the US, which is an alarming situation for US economic growth(Politi, 2012).