«The difficult financial situation will last for at least the next three years»
The US has an exorbitant national debt: for the first time in history, the amount has exceeded $35 trillion. American economists themselves describe the situation as alarming. According to them, this is an extremely sad page in the financial history of the United States. Over the past month, public debt servicing has exceeded spending on social security, healthcare, and education.
And the rate of growth of the national debt is colossal. Experts told MK whether the current situation means an imminent default of the USA?
Artem Deev, head of the analytical department at AMarkets: “In fact, things are not going well for the United States — the national debt exceeded $35 trillion for the first time, and this is not the first “record” in recent times. Also, the risk of default in the United States has greatly increased, there is a severe banking crisis in the domestic market, and public administration is weakening, as can be seen from the repeated lifting of debt limits and decisions made at the last minute. Coupled with the high and growing debt burden of the government as a whole, all this suggests that the difficult financial situation will continue for at least the next three years.
However, the debt ceiling has been suspended until early 2025, with the law cutting federal spending for two years. It should be noted that this was done de facto to leave the problem to the next administration, as the US presidential election will take place in November 2024. But it is also undeniable that US Treasury securities remain among the safest and most liquid assets in the world. So, I suppose if their national debt grows to $51 trillion over the next 10 years, they will somehow figure it out.»
Alexey Krichevsky, financial advisor, author of the Economism project: “The US national debt has gone into space since the pandemic — in just over 4 years it has grown from 23 trillion dollars to the current 35. But even before that it was growing at a very serious pace — from the mortgage crisis to COVID, its volume soared 2.5 times. So the accumulation of debt is a long-standing American history of financing the budget deficit, given that the income during the presidency of, for example, Trump easily allowed us to cope without loans. But given the low US rate, it was profitable to borrow money on the market, and now this, of course, hits the pocket harder and harder, especially bearing in mind the current state of affairs with the refinancing rate — it is now at 5.5% with the prospect of an imminent decrease. But the problem is that you will have to pay a lot, and it will be increasingly difficult for the country's economy to cope with this burden. We will have to try to somehow level out the difference between income and expenses in order to avoid disappointing investors. How to do this is a very big and difficult task for whoever is elected president of the country this fall.
At the same time, we cannot say that the US economy will suddenly burst, because then half the world that held US government bonds could be left without money. But even Trump’s talk about his intention to devalue the dollar in order to boost exports and make it easier to service debts suggests that big changes are brewing within the US economy. We should definitely not expect a default on US bonds — a much more likely scenario is that in a couple of years the most expensive securities will simply be bought up by the Fed and replaced with cheaper ones with a lower yield — of course, after the rate is reduced. But even this step will not inspire confidence in investors who were counting on a certain yield. Therefore, we can say that any step by future authorities at the first stage will only make the economy more painful. And at the same time, both Democrats and Republicans understand that it is simply unsafe to continue to increase debt at this rate.”