The US national debt will soon be growing faster than the economy itself
7 hours ago
- #Fiscal Policy
- #US Debt Crisis
- #Economic Warning
- The U.S. national debt has reached 100% of GDP, raising concerns about potential fiscal crises.
- The Committee for a Responsible Federal Budget (CRFB) warns of six possible crisis scenarios: financial, inflation, austerity, currency, default, and gradual crises.
- An 'Austerity Crisis' could lead to severe economic contraction, similar to Greece's experience during the Great Recession.
- A 'Financial Crisis' might occur if investors lose confidence in U.S. Treasury markets, leading to cascading bank failures.
- An 'Inflation Crisis' could arise if the Federal Reserve monetizes debt, sparking hyperinflation like in Argentina or the Weimar Republic.
- A 'Currency Crisis' could weaken the U.S. dollar, undermining its global reserve status and increasing import costs.
- A 'Default Crisis,' though unlikely, would be catastrophic, freezing global credit markets and triggering a deep recession.
- A 'Gradual Crisis' could lead to slow economic decline, as seen in Japan, with stagnant growth over decades.
- Potential triggers include recessions, poor Treasury auctions, or debt limit breaches.
- Interest costs on U.S. debt surged to $1 trillion last year, consuming 18% of federal revenue.