The Debt Crisis

After the debt crisis spreading in Europe, the outbreak of the US sovereign debtcrisis has once again attracts worldwide attention. However, the US debt crisis hasdifferent characteristics from past debt crisis. First, the United States is largesteconomic power. Second, dollar is the most important reserve currency in the world.Third, the US debt is the hub of the world asset pricing. Because of these features, theUS debt crisis has a strong negative effect not only on the economic recovery of theUS, but also on the whole world. It is meaningful to do some research on this debtcrisis. The lessons learned from this crisis will help countries to strengthen the riskprevention and monitoring. China need to considerate a series problems,such as howto control the debt risk within a certain range, how to strengthen debt managementand establish warning mechanism, in the future debt management.The paper will first analyze the reason, effect and rescue measures of the US debtcrisis, and then combine with empirical analysis to test the sustainability of the USfiscal deficit over the next decade using the intertemporal budget model. Finally, somesuggests are put forward concerning the debt management in the China.