The American debt could cause the global economy to collapse!

An imminent debt crisis looms over the world’s leading power, threatening to trigger a financial storm with global consequences.  Some analyses from the Congressional Budget Office (CBO) reveal that this debt is expected to reach a dizzying peak by 2030. Should this trajectory of the American economy shake confidence in the  dollar as a reserve currency?

American Economy: The Dizzying Escalation of Debt

The figures released by the CBO are chilling. By the end of the decade, the American public debt is expected to skirt around 106% of the GDP, a level unprecedented since 1945. However, this spiral is not new. It has its roots in the successive administrations’ spendthrift budget policies. It begins with the generous tax cuts granted by Trump. Moreover, the economic stimulus plans launched by Biden have considerably deepened the deficit.

If American debt continues on this trajectory, the consequences could be devastating for the global economy. Indeed, a crisis of confidence in the American debt, considered the safest asset, could cause a steep fall of the dollar. Many countries hold significant reserves in greenbacks, their reserve currency. Such devaluation would lead to massive financial turbulence on a global scale. Furthermore, investors could turn away from U.S. Treasury bonds. This action risks causing a surge in interest rates and a global economic slowdown.

The Political Stakes of a Budgetary Reform

Facing this imminent threat, bold measures to clean up American public finances are imperative. However, the political stakes surrounding the 2024 presidential election may complicate efforts of budgetary reform. While Trump promises new tax cuts, Biden struggles to convince about his ability to rectify the accounts. This political paralysis could prove to be fatal, fueling a climate of economic uncertainty worldwide.

In short, note that the American debt concerns not only the United States. Because of their place in the global economy ranking, it will surely affect the whole world. If they fail to regain control of their public finances, the global economy is therefore threatened. It is urgent that the international community unite its strengths to avoid an unprecedented economic disaster.