US debt is already $ 37TN – should we worry?

While Donald Trump cheered the passage of his independent and officially declared, large beautiful budget bill through the congress this week, you have long been affected by the seeds of doubt about the scale and sustainability of US loans from the rest of the world have re -emerged.

The Trump tax reduction bill is expected to add at least $ 3 trillion (£ 2.2 trillion) to the US 37TN (27TN) mirrors on the pile. There is no shortage of critics of the plan, not least former Trump ally Elon Musk, who has called it “disgusting abomination”S

The increasing pile of debt leaves some to wonder if there is a limit to how much the rest of the world will give Uncle Sam.

These doubts have recently emerged at the more glorious dollar value and the higher interest investors require them to borrow money for America.

I have to borrow this money to compensate for the difference between what it earns and what it spends every year.

Since the beginning of this year, the dollar has fallen by 10% compared to the pound and 15% against the euro.

Although loan costs in the United States are stable in general, the difference between interest rates paid for longer-term loans against shorter-term loans-what is known as the profitability curve has increased or increased, signaling increased doubts about the long-term resistance to US loan.

And this is despite the fact that the US has lowered interest rates more slowly than the EU and the United Kingdom, which would usually make the dollar stronger, as investors can receive higher interest rates on bank deposits.

The founder of the largest hedge fund in the world, Ray Dalio, thinks US loans are at a crossroads.

In its current trajectory, he estimates that the US will soon spend $ 10 a year on loan and interest payout.

“I am convinced that the financial status of the government (US) is at a point of folding, because if that does not handle it now, the debts will accumulate to levels where they cannot be managed without much trauma,” he says.

So what can this trauma look like?

The first option is a drastic reduction in government spending, a major increase in taxes or both.

Ray Dalio suggests that reducing the budget deficit from its current 6% to 3% may soon give way to problems in the future.

The new Trump budget bill has reduced some costs, but also reduced taxes more, which is why the current political trajectory goes the other way.

Second, as in previous crises, the US Central Bank can print more money and use it to buy government debt – as we have seen after the major financial crisis of 2008.

But this can lead to nourishment of inflation and inequality, as asset owners such as houses and stocks are much better than those who rely on the value of labor.

The third is directly directly in the United States. Can’t pay will not pay. Given that “the full faith and credit of the US Department of Finance” are at the heart of the entire global financial system, this would make the big financial crisis look like a picnic.

So, how much is something like that?

At the moment, mercifully, not much.

But the reasons why they are not really so soothing. The fact is, whether we like it or not, the world has few alternatives to the dollar.

Bond Mohammed El-Erian’s sapramo’s economist and former Suprem told the BBC that many are trying to reduce holding holdings, “the dollar is overweight and the world knows it, which is why we have noticed a rise in gold, the euro and the pound, but it is difficult to move on a scale.

“The dollar is like your cleanest dirty shirt, you should continue to wear it.”

Nevertheless, the future of the dollar and the global reference asset – US government bonds – is discussed at the highest levels.

Recently, the governor of the Bank of England told the BBC that US debt levels and the state of dollar are “a lot for (the US Treasury) Bessent.

The $ 37TN debt is an unattainable number. If you save a million dollars every day, it will take you 100,000 years to save so much.

A reasonable way of looking at a debt is a percentage of a country’s income. The US economy produces income of about 25TN per year.

Although his debt to income level is much higher than many, it is not as high as Japan or Italy and benefits the most innovative and wealth in the world, creating an economy behind it.

At home, I have a book called Death of the Dollar by William F Rickenbacker, in which he warns of the risks to the status of the dollar like the world reserve currency. It was written in 1968. Rickenbacker is no longer with us – the dollar is.

But this does not mean that its status and value is divine right.