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US Government Warns Mounting Debt Could Crush Dollar

Amid the de-dollarization efforts implored by the BRICS alliance, the US government has warned that mounting debt could eventually crush the dollar. Indeed, the Congressional Budget Office (CBO) released a long-term budget outlook warning of the consequences that could come from the current budgetary system.

Specifically, the CBO noted that if spending remains unchanged, the budget deficit would “increase significantly in relation to gross domestic product (GDP) over the next 30 years.” Moreover, the office warned that inaction could “heighten the risk of a fiscal crisis,” and threaten the greenback.

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Also Read: BRICS: Goldman Sachs Says Central Banks To Drive Gold Price

US Government Issues Stern Warning of Debt Implications

Throughout the last year, the global economy has sought currency diversification in a much broader sense. The United States dollar remains the global reserve currency, but it has not gone uncontested. A plethora of Central Banks have sought to increase gold holdings, and local currency promotion to decrease the fallout of a potential dollar collapse.

Now, the concern about such a reality has only increased due to recent statements from country officials. Specifically, amid BRICS de-dollarization the US government has warned mounting US Debt could eventually crush the dollar. In its long-term outlook, the CBO noted that “such large and growing debt would have significant economic and financial consequences.”

By the end of 2023, the US federal debt reached $26.2 trillion, which is 97% of GDP. Moreover, the CBO predicts that the ratio to continue climbing, eventually usurping World War highs of 116% by 2029. Moreover, they expect it to be as high as 166% by 2054 on its current trajectory.

President Biden has requested $24 billion in taxpayer money from Congress to support war efforts in Ukraine.President Biden has requested $24 billion in taxpayer money from Congress to support war efforts in Ukraine.

Also Read: BRICS Bank To Make $5 Billion in Loans in 2024

Speaking to the Financial Times, CBO director Phillip Swagel warned of the risks that the government is facing regarding its currency. Specifically, he referenced the UK’s position in 2022. When economic change where announced by then Prime Minister Liz Truss, the British Pound collapsed against the dollar. Ultimately, Truss’s government would face its own collapse.

“The danger, of course, is what the UK faced with former Prime Minister Truss,” Swagel stated. “Policymakers tried to take an action, and then there is a market reaction to that action.”

Swagel and the CBO are warning that delaying the debt issue could provide the same kind of issue in the United States. Yet, the consequences could be far greater for the global reserve currency.

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