Debt: A dangerous threat
Dario has argued that US President Donald Trump has only three years to sharply contain the country’s fiscal deficit, or else it ignites a debt crisis that could lead the country into a “death spiral.” He claimed there was a risk.
His alerts have already focused on an increase in national debt of more than $36 trillion. He characterized it as a dangerous accumulation, and according to the report he drew it parallel to plaques in arteries of the American financial system.
He said: “The US will operate a deficit of about 7.5% of GDP if Trump’s tax cuts continue.”
Bond Market Limits
With U.S. Treasury debt reaching record highs, Dario is worried that bond investors will soon be unable to take on the increase in debt and will raise interest rates to unsustainable levels. He said that unless the Trump administration persuades bond investors to accept low returns on investors’ investments, if the ongoing government abundance is not detained, he would be “an economic heart attack” according to the report. claimed it was imminent.
Dario said if measures are not taken to reduce the deficit to 3% of GDP over the next three years, the US could be in a frightening position that borrowing would be more expensive and unsustainable.
Austerity and difficult choices
White House economic adviser Kevin Hassett outlined the administration’s plan to address inflation: “Increase supply and reduce aggregate demand.” To increase supply, that is, increasing economic output per hour, will make great progress, such as incorporating artificial intelligence and robots into productivity, or encouraging workers to spend more time. It means. According to Dario, these are not quick or simple solutions, particularly given the Trump administration’s controversial proposals on the massive deportation of illegal immigrants that constrain the workforce.
As a result, Trump will likely need to aim to reduce demand, although it is a complication of its own. Simply put, reducing demand requires slowing the economy by reducing government spending. This is a process known as austerity.
He said austerity may not be popular among many Americans who are already suffering from inflation. But he said, “Time has been shortened, and now it’s essential to move faster at the cost of breaking things.”
FAQ
Why is Ray Dario worried about the US economy?
Dario is interested in an increase in US national debt, which is more than $36 trillion. He argues that unless the government moves to narrow its deficit crucially, the state could risk a fiscal crisis, which leads to a “death spiral.”
How will it affect Americans?
Dario warns that narrowing down the deficit could involve strict choices, such as trimming government spending. If necessary for the economy, the measure could hurt ordinary Americans, especially Americans who are already under strain by high inflation and cost-of-living pressures.
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