American economy in danger due to huge debt – Dainik Savera Times

As of January 2, local time, the total public debt of the US government exceeded US$340 trillion for the first time. This was five years earlier than the US Congressional Budget Office had predicted.

What is the concept of 340 trillion US dollars? According to the calculations of relevant US agencies, this is more than 120% of the US GDP, which means that every American has a debt of at least US$1 million. If every American household contributed US$1,000 per month, it would take 22 years to pay off this massive debt. This has put a huge strain on the American economy and society.

How did such a huge debt arise? The US government has long issued government bonds to obtain funds to finance the deficit. Due to extremely low borrowing costs, the “US debt snowball” is getting bigger and bigger. Following the outbreak of the COVID-19 pandemic, the US economy is in crisis. To stimulate economic recovery, the US government issued large amounts of bonds, causing the debt to grow faster than expected. To curb inflation, the Federal Reserve has continued to raise interest rates, further increasing the US government’s debt service costs. As government spending increases and taxes decrease, the scope of debt will inevitably increase.

Analysts estimate that based on current trends, the US government will increase its debt by more than US$20 trillion per year. Outsiders expect the US debt problem to get worse.

According to data from the US Congressional Research Bureau, since the end of World War II, the US Congress has adjusted the debt ceiling hundreds of times to prevent the government from shutting down due to bankruptcy. Often causing serious market turmoil and triggering criticism from all sectors of the country. Questions also arose about the US government’s ability to repay its debt. As a result, international rating agency Fitch downgraded the US sovereign credit rating. The Peterson Foundation said the large and growing debt “endangers the future of the US economy.”

Foreign debt constitutes a high proportion of US government debt. The US debt has reached a new high and the risk of default has increased, which will inevitably affect the confidence of foreign investors in the US economy.

In the context of the debt crisis, both parties in the US will continue to fight fiercely on budget issues in Congress. If no agreement is reached, the US government may face another shutdown. Once this happens, a large number of government employees will be forced to take unpaid leave or have their salaries delayed, and government spending cut projects are often closely related to people’s livelihood projects. In other words, it is the ordinary American people whose interests are ultimately harmed.

From an international perspective, since the US dollar is the world’s number one reserve currency and settlement currency, the US will cause fluctuations in the international financial market and affect the global economy. US Treasury Secretary Yellen warned that if the US defaults on its debt, it will have serious consequences and a huge impact on the US and world economy.

(Courtesy-China Media Group, Beijing)