The US government has spent about $28 trillion since 2020, sending its debt to a record high of about $33 trillion.
Spending has blown an “amazing hole” in the country’s public finances, according to Larry MacDonald.
Earlier this year, experts such as Ray Dalio and Nouriel Roubini also warned of the risk of a debt crisis in the United States.
US government debt approx doubled in the past decade to a record level of nearly $33 trillion, or 122% of the country’s gross domestic product.
This worries experts.
Fiscal spending has skyrocketed since the pandemic and shows little sign of slowing — and this has created a “stunning hole” in the country’s public finances, according to markets expert Larry MacDonald. In a post on WednesdayThe author and former strategist cited data from Qubaisi’s message to clarify his concerns.
Federal spending over the period 2020-2023 was a staggering $28 trillion. He pointed out in an X post the same day.
“There is a price to pay… it is not free,” he added.
McDonald is not the only commentator who has expressed concern about the ballooning US debt burden in recent months. Billionaire investor Ray Dalio warned in June that the United States is at the beginning of a “classic late debt crisis and a great cycle” characterized by the country facing a shortage of buyers for its bills and bonds. As did the veteran economist Nouriel Roubini Similar concerns were expressed.
Fitch Ratings lowered the long-term credit rating of the United States earlier this month, noting the “steady deterioration in governance standards over the past 20 years, including in financial and debt matters”.
Concerns are also growing about fiscal pressures, as a sharp rise in interest rates causes a jump in the cost of federal borrowing. The market rate for 10-year Treasury notes has risen to about 4.25% from a low of 0.32% in early 2020 — a 13-fold increase in just over three years — as the Federal Reserve raised interest rates to combat inflation.
MacDonald, founder of the Bear Traps report, also discussed potential ways to reduce debt – including austerity, radical currency reform, and through inflation.
“Another way to improve the debt-to-GDP ratio is by reducing the hidden debt, ie inflation. It is an old truism that inflation is a tax, and raising taxes directly is a politically unpalatable risk,” he wrote in his blog. “Financial repression means keeping the earnings of savers below the rate of inflation. This is what the US and UK did after World War II.”
“The financial repression of the US government is a backdoor means of reducing government debt and thus improving the debt-to-GDP ratio to a sustainable level,” he wrote. “Politicians hate raising taxes directly on the middle class, so they tax everyone through inflation.”
Read the original article at Business interested