Unit 2

Money has been around for a very long time. In the modern economy it is the cornerstone for, well the economy. Our world runs on money for a simple reason, it’s an easy way to assess value. Every piece of matter on the planet has a value from precious metals such as gold and platinum to living beings such as you and me.

The modern form of money most of the world uses is Fiat money. Fiat money has value because the government or organization that controls it says it does. Before Fiat money there was hard currency that was based off of precious metals, mainly gold. This was called the Gold Standard. There was a transitional period between these two units of currency that occurred between the civil war and 1971 when President Nixon officially ended the convertibility between the US dollar and gold.  The transitional period consisted of paper money that was still interchangeable at a valid tender for gold. The problem with this form of money is that there simply isn't enough gold to go around considering the entire world’s supply of gold could fit into two Olympic sized swimming pools.

Another important feature tied to our current economy is the national debt, and with it, the debt limit. Because the US spends so much money and like wise borrows so much money, the US is constantly in debt. The current amount of debt the US has is approximately 16.7 trillion dollars. The US government has also implemented a limit on how much the US is allowed to borrow or in other words how much debt it can have. This is called the debt limit. The problem with the debt ceiling is that for it to work we have to raise the debt ceiling every couple of years because of either radical spending or simply inflation. The problem with this is that when the debt ceiling is not raised, it causes all sorts of havoc. Because the US dollar is the cornerstone for the majority of the worlds economy, having the credit rating of it would have a massive impact not only on the US but the world. 

Our current situation with the debt ceiling is a "spar" between the Democrats and the Republicans. Both parties want the debt ceiling raised but republicans are forcing the issue of the Affordable Health Care Act (Obamacare) into all bills moving through the house. Obamacare has been approved by congress previously and has been held constitutional by the supreme court. With the Republicans in the House and the Democrats in the Senate, nobody is willing to budge. People have compared it with a game of chicken but I like to think about it as two men having a staring contest next to a live explosive device where both men are trained to disarm it. This is a prime example of a small portion of the government (the Tea Party) holding the entire government at a standstill because they didn't get their way.