Dear Reader,
Currently the US government debt is almost 21 trillion USD or 105.4% Government Debt/GDP ratio.
Is this situation sustainable? No. Had USA similar levels of debt before? Yes, in 1946 Government Debt/GDP was 118.90%. After world war 2 the USA managed to diminish its debt burden.
Can the US continue to lead and manage the world with so much government debt? No. It can not. At least, not to the same degree as recently. China holds large portion - more than 1 trillion USD of US government treasury securities. Currently, the US President Donald Trump is being confrontational with China with his trade policies and other measures. This could lead to China selling off large portions of its US treasury debt load and the yields on US Treasuries could shoot sky high.
The US is vulnerable in that respect. I think Trump realizes that. If the USA does not manage to clear its debt like it did after the Second World War, America is headed for trouble. The US dollar continues to be the world's foremost reserve currency and this cushions the situation so far, but that may not be the solution forever.
The bottom line? I think the USA will continue to lead the world, but because of its high indebtedness USA's position is weakened. Can America get rid of the huge debt load? Yes. How? Strong growth, inflationary spiral, technological breakthrough are some obvious solutions. Will America cut down its government debt. Yes. I bet on USA surviving this mini crises and going on to lead the world again along with the other superpowers.
Disclaimer:
The blogposts and comments on this blog and posts on social
networks(Twitter, LinkedIn etc.) are not investment recommendation,
are provided solely for informational purposes, and do not constitute an
offer or solicitation to buy or sell any securities. The opinions
expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!
Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Kind regards,
Petar Posledovich
Stocks valuations, analysis. Unbiased. Insightful. Property of Wolfteam Ltd., www.wolfteamedge.com If you find the blog useful, LINK TO www.posledovich.blogspot.com Stocks, Bitcoin, Cryptocurrencies, AI, analysis, insights. CLICK ADVERTISEMENTS, SHARE ON SOCIAL NETWORKS! Technology, Bitcoin, AI, company strategy, stocks analysis. Stocks, crypto involve high RISK! Nothing on this blog is meant or should be construed as investment recommendation to buy or sell securities or their derivatives!
No comments:
Post a Comment