Catastrophe looming: US debt at record levels – what to do now?

Catastrophe looming: US debt at record levels – what to do now?

The U.S. national debt currently stands at approximately $36 trillion, equivalent to 125 percent of gross domestic product (GDP). Loud fr.de This debt could rise to an alarming 156 percent of GDP by 2055. This development has already led to an increase in risk premiums on ten-year US government bonds, while Moody's has downgraded the US rating. Despite these concerns, the stability of the bond market remains strong, largely due to the US dollar's role as the dominant global currency.

In 2022, the US dollar accounted for around 60 percent of global foreign exchange reserves. However, economists warn of a possible loss of confidence in the currency, which could have serious consequences such as inflation or recession. Jacob Lew, a former U.S. Treasury secretary, raises concerns that a default on the federal deficit could lead to a recession.

Risks and warnings in the bond market

Goldman Sachs CEO John Waldron sees rising long-term interest rates as a serious risk to economic growth, while JPMorgan Chase CEO Jamie Dimon warns of a possible “bond market crack” due to rising debt levels. Trump's budget plan could also further increase the deficit; Forecasts suggest U.S. debt could rise by $3.3 trillion by 2034. Moody's warns that the deficit could grow from 6.4 percent of GDP to almost 9 percent by 2035.

Ray Dalio, the founder of Bridgewater Associates, raises similar concerns. He warns of the risks of the US bond market and rising national debt. Loud hauptcheck.de The high national debt could lead to a loss of confidence in the bond market, which would have a direct impact on interest rates. Rising interest rates could devalue existing bonds and increase the cost of new loans.

“A loss of confidence in US government bonds could destabilize global financial markets,” warns Dalio. He emphasizes the importance of transparency and learning in uncertain times and recommends that investors critically examine their portfolios. Investors should also weigh the risks associated with high U.S. debt levels and prepare for increased volatility.

Investment strategies in turbulent times

Given the uncertain economic situation, Dalio recommends using inflation-indexed bonds (TIPS) and gold as protective measures for investors. He suggests investing 10 to 15 percent of your portfolio in gold. Bitcoin is also mentioned as a possible investment opportunity, but with the recommendation to only invest a small percentage. The current price of Bitcoin is almost $110,000.

With all of these developments, it becomes clear that the economic situation and national debt in the USA could have not only national, but also global implications. It remains to be seen how the markets will respond to these challenges.