The International Monetary Fund (IMF) recently released the 2024 U.S. Article IV Consultation (IMF's annual routine assessment of member countries' economic performance and macroeconomic policies) report, arguing that the excessive fiscal deficit and debt size of the United States pose an increasingly significant risk to the domestic and global economy, and urging the U.S. government to solve this long-standing problem as soon as possible.
Screenshot of the report on the official website of the International Monetary Fund
"The debt problem is completely out of control!"
According to a report released by the U.S. Congressional Budget Office a few days ago, the U.S. federal government's budget deficit for fiscal year 2024 has been sharply revised up by 27% compared with the previous forecast, reaching about $1.92 trillion.
In addition, the cumulative fiscal deficit projection for the next decade from 2025 to 2034 has also been significantly raised. Factors driving the upward revision include foreign military support, student loan forgiveness, and increased deposit insurance spending.
The IMF report notes that the U.S. government's excessive fiscal deficit has led to a sustained rise in the federal public debt as a percentage of gross domestic product (GDP).
Screenshot of the Bloomberg website report
According to the real-time updated data on the website of the U.S. Department of the Treasury, as of June 29 local time, the total U.S. federal government debt has reached $34.72 trillion, equivalent to $103,000 per American.
In its report, the IMF noted that the chronic fiscal deficit reflects a "significant and persistent policy misalignment" in the U.S. government. If current policies continue, the U.S. public debt will exceed 140% of GDP by 2032.
IMF Managing Director Georgieva believes that the US government urgently needs to curb and reverse the dangerous trend of rising public debt to GDP for a long time.
"Washington must act to rapidly reduce government debt as a percentage of GDP through a range of policies, including raising taxes and addressing structural imbalances in the economy."
Georgieva (data map)
The surging debt has also led several members of the U.S. Congress to warn that the U.S. is "rapidly approaching the point of crisis."
Republican Senator Mitt Romney, Democratic Senator Joe Manchin, and Rep. Scott Peters recently jointly published an article in the US "Capitol Hill" newspaper saying that the US debt is exploding at an unsustainable rate and has become the biggest threat facing the United States.
"It's time for Congress to act."
Screenshot of the report on the website of The Hill
U.S. Senator Rand Paul of Kentucky warned that unbridled borrowing will exacerbate the vulnerability of the U.S. fiscal face to shocks.
"The debt problem is completely out of control! By fiscal year 2028, net interest payments on U.S. Treasuries alone are expected to more than double from today to about $1 trillion. Debt yields will be the federal government's largest spending item, and Americans will pay dearly for it. This could mean rising tax rates, high inflation, and a weak economy. ”
Rand Paul (data map)
Su Xiaohui, a special commentator for China Central Television, pointed out in an analysis that the main reason for the surge in US national debt is that the US federal government has been unable to make ends meet for a long time, and it is difficult to get rid of the "root cause" of the budget deficit.
She believes that if the U.S. government doesn't change the way it spends its money, the next possible problem is defaulting on its debt.
Debt growth faster than economic growth 'unsustainable'
The U.S. government has been borrowing heavily since the 80s, going from a net creditor to a net debtor in 1985, and the debt has been rising ever since.
Tracing back to its roots, the "soil" for the savage growth of US debt is the hegemony of the US dollar.
Driven by the concept of maximizing the interests of the United States, the Federal Reserve has diluted investors' interests through unconventional monetary policies such as quantitative easing or aggressive interest rate hikes, or by driving down U.S. Treasury yields. Or raise the yield of U.S. bonds, accelerate the return of the dollar, and repeatedly harvest the wealth of other countries.
According to Marcos, an economist at Brazil's São Paulo State University, the United States has too high a privilege in the choice of monetary policy. "In a country like Brazil, for example, it takes a ton of iron ore to be dug underground to create a value of $100. And the Americans only need to hit enter on the computer to create $100 and the money is printed. ”
In the long run, the rising US debt is the result of the irresponsible fiscal policies of successive federal governments.
Under the influence of political factors such as the vicious struggle between the Democratic and Republican parties, the debt problem has been seriously politicized. The political incompetence of the U.S. government in resolving its huge debt is seriously undermining its own credibility, not only undermining market confidence in the U.S. government and the U.S. dollar, but also seriously affecting the credit systems of many countries, including the U.S., and dragging down the global economy.
Even Fed Chairman Jerome Powell previously admitted in an interview that US debt is growing faster than the economy, which is unsustainable.
Screenshot of the report on the website of The Hill
Michael Widmer, commodity strategist at Bank of America, expects gold to rise to $3,000 an ounce in the next 12 to 18 months due to a combination of factors such as central banks reducing their holdings of the dollar in their foreign exchange portfolios and their strong demand for precious metals.
Widmer stressed that market analysts generally believe that the Treasury crash is becoming a growing "tail risk" (i.e., an "extreme risk" that is unlikely to happen and would be costly if it does), and that "the US bond market may be just one shock away from a collapse."
Michael Widmer (data map)
Maya McGinias, chairman of the Federal Budget Accountability Committee, an independent research institute in the United States, believes that the US government's abuse of the dollar status and serious overdraft of the US dollar credit have led more and more countries to actively seek diversified trade settlement, pricing and reserve schemes outside the dollar system in order to protect their national interests. This has made "de-dollarization" an international trend.
She warned that if the United States continues to abuse the hegemony of the dollar, the status of this international reserve currency will only continue to be weakened. "In the long run, it will either lead to a crisis or cause other countries to turn their noses up at the United States."
Material source丨Global Information Broadcasting "Global Deep Observation"
Planning丨Zou Haoyu
Reporter丨Huang Tao
Editor丨Wei Yu
Signed丨Wang Jian
Producer丨Guan Juanjuan
Editor: Shu Mengqing
Source: Global Information Broadcasting