Source: Wall Street News
Michael Hartnett, a well-known Bank of America analyst, believes that the scale of US debt is rapidly expanding, and “credit depreciation” transactions are close to historic highs, which has also become the reason for the sharp rise in the prices of assets such as gold and Bitcoin.
Recently, the size of America's “snowball” debt has continued to “explode”, increasing by about 1 trillion US dollars every 100 days.
US Treasury data shows that since the second half of last year, US debt growth has accelerated markedly. After reaching 32 trillion US dollars on June 15 last year, it reached 33 trillion US dollars on September 15. As of February 28, the size of US debt was $34.4 trillion. Prior to that, it took about 8 months for the US debt to increase from $31 trillion to $32 trillion.
In response, Bank of America investment strategist Michael Hartnett said on March 2 that according to the current debt growth rate, it is estimated that it will only take 100 days for the debt to rise from 34 trillion US dollars to 35 trillion US dollars. “With the rapid expansion of debt, 'credit depreciation' transactions are close to historical highs, which is why the prices of gold and bitcoin have soared sharply.”
Hartnett believes that US debt will increase by 18 trillion US dollars within 10 years to 52 trillion US dollars by 2023, an average daily increase of 5.2 billion US dollars.
As early as August 1, 2023, the international rating agency Fitch downgraded the default rating of US long-term foreign currency issuers from AAA to AA+. Fitch issued a statement on the same day saying that the downgrade of the US credit rating is mainly due to the US government's high and increasing debt burden, and the financial situation is expected to continue to deteriorate over the next 3 years.
On November 10, international credit rating agency Moody's decided to downgrade America's sovereign credit rating outlook from “stable” to “negative.”
Biden's economic adviser also acknowledged that even a “brief” debt default would cost the US economy 500,000 jobs. A “long-term” default would cause the US GDP to plummet by 6%, which could seriously affect global trade and plunge the rest of the world into deep recession.
The price of gold soared by about 50 US dollars last week. As of press time, spot gold surpassed 2,100 US dollars/ounce to reach 21,13.2 yuan, and has remained at a new high since December 2023.
As of press release, Bitcoin has surpassed 68,000 US dollars, rising about 6,800 US dollars in the last 24 hours, approaching the record high of 68991.85 US dollars set on November 10, 2011.
The US has the highest debt in the world for 10 consecutive years
The International Finance Association (IIF) said in the “Global Debt Monitor” report that total global debt set a new record in 2023, reaching US$313 trillion, with the largest increase in the US. According to US Treasury data, by the end of 2023, the size of US debt had risen to US$34.001 trillion, ranking first in the world for ten consecutive years.
The US debt accounts for more than 120% of GDP. Based on the current US population (336 million), it is equivalent to a debt of 103,300 US dollars (approximately RMB 720,000) per American.
According to media analysis, the increase in debt is mainly due to increased government spending and reduced taxes, which in turn led to an increase in the size of the federal government deficit. Meanwhile, soaring inflation has boosted interest rates and further increased the government's debt repayment costs.
American economist Peter Schiff said this is a worsening situation. “We have to borrow money to pay interest. Every penny of interest the government pays on debt requires borrowing.
The International Monetary Fund (IMF) is concerned that the US may enter a vicious cycle of “borrowing money to repay debts, repaying debts and borrowing money,” which will make it more difficult to resolve the debt crisis. “All this additional borrowing will increase the national debt, which in turn must be financed at higher interest rates.”
Editor/jayden