The US debt crisis has been a topic of discussion for several years, and many people feel that it has become the "new normal" for the American economy. However, recently, prominent figures in the United States have been speaking out one after another, indicating that the US debt crisis has escalated and is on an "unsustainable" path.
The US debt has become "unsustainable."
So, what is the current situation with the US debt crisis? Let's take a look at the unsustainable debt crisis in the United States and the "warnings" from many big names.
Powell speaks up, US Congress warns! Is the US debt unsustainable?
Going back to February 4th, at that time, Federal Reserve Chairman Powell rarely accepted a 60-minute media interview, during which he revealed quite a few top-secret messages: for example, hinting that the Federal Reserve would not raise interest rates in March, which directly caused the yield on US Treasury bonds to collapse.
Powell's 60-minute interview
One of his statements also attracted market attention: "The growth rate of debt has exceeded the growth rate of the US economy," so this is unsustainable, and I think there is no dispute about this point.
As the most powerful person in the global financial field, why did Powell make such a judgment? In fact, there is a great connection between the total amount of US debt and interest rates.
First, let's look at the official data from the United States. The conclusion given by the Treasury Department shows that the scale of US federal debt at the beginning of January has already exceeded 34 trillion US dollars, setting a historical record. This means that the total amount of US debt is particularly huge.
The scale of US debt has already exceeded 34 trillion US dollars.Secondly, the pace at which the total U.S. debt has increased is also quite exaggerated. It took the U.S. government only three and a half months to go from $33 trillion to $34 trillion, indicating that the speed of U.S. debt growth is very fast, surpassing the previous expected rate set by the U.S. Congressional Budget Office. The U.S. debt now accounts for 122.30% of GDP, and it is projected to exceed 150% in five years!
Moreover, the enormous scale of U.S. debt, combined with the high interest rates brought about by the Federal Reserve's rate hikes, has led to a continuous increase in the U.S. government's fiscal interest expenditures.
Two years ago, before the Federal Reserve had raised interest rates, although the U.S. also had $30 trillion in debt, the annual interest paid was very low. This was because the U.S. federal funds rate was extremely low at that time, only at a level of 0.25%-0.5%.
However, now that the U.S. is at the end of its interest rate hike cycle, the federal funds rate has risen to 5.25%-5.5%, which means that the U.S. Treasury needs to pay a much higher interest rate than before.
The U.S. federal funds rate continues to rise and has now reached its highest level in decades at 5.5%.
On February 7th, the U.S. Congressional Budget Office (CBO) issued a warning: they stated that, based on data calculations, the U.S. fiscal budget deficit will soar due to high interest rates and $34 trillion in debt. Over the next ten years, the U.S. fiscal deficit will skyrocket from $1.6 trillion to $2.6 trillion.
What's worse, the interest on U.S. government debt will account for three-quarters of the deficit! This means that the interest payments the U.S. government needs to make each year will take up most of the deficit budget. The ever-increasing debt burden, coupled with unchecked fiscal and military expenditures, will make the U.S. fiscal situation unbearable!
Therefore, many economists, based on reports from the U.S. Congress, have stated that U.S. debt is on an unsustainable path, and unless the U.S. government makes changes, U.S. debt will become unsustainable.
The U.S. Congressional Budget Office has repeatedly warned about the debt crisis.
This is also why Federal Reserve Chairman Powell said that the U.S. is on a path of financial unsustainability.The weakening dollar hegemony and the negative impact of US debt
Many people have an illusion that 20 years ago we were all shouting about the decline of the United States, and 20 years later we are still shouting about the decline of the United States, but the US economy is still very good, so the theory of the decline of the United States is actually a "pseudo proposition" and a deceptive trick.
However, those who have studied history know that the time scale of history itself is a cycle of 10 years. As a superpower, the United States has a very large economy and technological lead. Although it has experienced a decline, collapse will not happen overnight.
If we extend the time dimension and compare the current United States with the United States decades ago, we will find that the current United States' influence in the world is far less than its previous level.
Gold standard period, US dollar = gold
From an economic perspective, the previous US dollar was equivalent to gold, and the world was dominated by the gold standard system. The green dollar could be exchanged for gold without limit. The vast majority of international trade around the world was based on the US dollar, and there was no European Union at the time, so there was no business for European countries.
Now, although the US dollar is still the world's main trading currency, both the rise of the euro and the strategic cooperation between China and Russia, which has led to the regional internationalization of the ruble and the renminbi, have challenged the existence of the US dollar.
Moreover, with the United States' indiscriminate issuance of US debt and the debt of tens of trillions, the credibility of the current US dollar is getting worse and worse. The three major international rating agencies can't stand it and have successively lowered the credit rating of the United States.
Therefore, the hegemony of the US dollar has indeed shown a continuous decline in recent decades. Although it is not obvious in a few years, compared with the previous US dollar, it can be said that its purchasing power has declined countless levels!
This can also lead to a very obvious conclusion: the hegemony of the US dollar is indeed declining with the passage of time!So, what are the negative impacts of the U.S. debt crisis? It is necessary to mention the warning from the legendary American investor Paul Tudor Jones: The market will sooner or later feel the negative effects of the huge U.S. debt and fiscal deficit. Although the current U.S. economy is good, it is due to government borrowing and is not sustainable. The United States is facing the threat of a "U.S. debt bomb."
The world's three major rating agencies have downgraded the U.S. credit rating due to debt issues.
His basis for judgment is simple but convincing. According to the current U.S. economic data, GDP and debt, the trend of the U.S. economy is very strong. However, this unnatural growth is due to the astonishing borrowing and expenditure of the U.S. government, which is equivalent to injecting a stimulant into the U.S. economy.
As long as the U.S. debt does not explode, to be honest, this kind of play can continue indefinitely.
However, the total amount of U.S. debt is not unlimited. Not to mention other things, the interest expenditure of U.S. debt alone in one year has exceeded 1 trillion U.S. dollars, which means that the U.S. "debt bomb" is actually brewing.
Summary
The U.S. debt crisis is mentioned many times every year, but the level of concern for U.S. debt this time has actually gone up a level. Not only the Chairman of the Federal Reserve Powell and the U.S. Congressional Office, but also the legendary American investors and a series of economists.
Their views, opinions, economic data, and congressional forecasts all show that the U.S. debt crisis is unsustainable, and the interest that the U.S. Treasury needs to pay every year is also getting higher and higher. The U.S. finance is on an unsustainable path.
The U.S. debt bomb will eventually explode.
Therefore, if the U.S. government and both parties can realize this issue, there may still be a chance to save the U.S. debt, of course, this means that the U.S. government needs to cut expenses and reduce spending.However, if both parties are unwilling to give up the simplest and easiest method of issuing debt to stimulate the economy, then the United States' debt bomb may continue to grow larger until it ultimately collapses, causing a global financial crisis. At that time, no country in the world will be able to stand alone.
So, when the U.S. government "cares" about our country's debt issues, I can't help but ask, can the United States really handle your own debt crisis?