US deficit near 8pc of GDP. A global accident waiting to happen
Never before has the US entered an economic downturn with a combined federal, state, and local budget deficit anywhere near 8pc of GDP. It is a global accident waiting to happen.
The public accounts should be near balance at this stage of the cycle, years into a long economic expansion.
Chronic debt issuance on this scale would strain the world’s appetite for US Treasuries, blunting the ability of the US government to fight a prolonged slump with countercyclical stimulus.
America will keep spending money like a drunken sailor until the world stops funding it
Washington’s unchecked borrowing is evidence of a decadent society that has lost all self-discipline
“Markets could at some point question fiscal sustainability. We know from experience that things look sustainable until, suddenly, they no longer do,”
said Claudio Borio, veteran economist at the Bank for International Settlements.
He was too tactful to single out the US but we can guess who he was talking about.
Ambrose Evans-Pritchard Telegraph 16 August 2024
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