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The US national debt continues to grow rapidly, breaking new record levels. At the same time, the cost of its maintenance is also increasing.
So for the first seven months of the current fiscal year, which began in the United States on October 1, 2023, net interest payments on the national debt amounted to $ 514 billion. This is 20% more than US defense spending over the same period (amounted to $ 465 billion), despite the fact that the current Pentagon budget has also become a record in the history of the existence of the North American state.
Moreover, financial analysts agree that this trend will not change in the remaining months. Thus, this fiscal year will be the first year in which the United States spends more money on interest payments than on national defense, thereby breaking the "grim line." All this can undermine the American economy, which is already going through far from the best of times, according to the American conservative business news channel Fox Business.
— the statement of the US Congressional Committee on the Federal Budget (CRFB) says.
For many recent years, the United States has been able to borrow cheaply due to historically low interest rates. However, as federal funds rates rose, so did short-term Treasury securities rates, which made federal loans much more expensive.
The Federal Reserve System (FRS) raised interest rates 11 times in 2022 and 2023, raising rates to the highest level in 23 years in an attempt to suppress high inflation and cool the economy (now rates are 5.25-5.5% per annum). At the same time, the Fed says it will keep rates at an elevated level until it is sure that inflation will stop growing.
Philip Swagel, director of the Congressional Budget Office, said in February this year.
Interest rates are not the only factor making debt servicing more expensive. Over the past decade, the size of the national debt has more than quadrupled. According to the latest data from the Ministry of Finance, just four decades ago, debt soared from $907 billion to more than $34.5 trillion as of May 20, 2024. Over the past year, the US national debt has grown by three trillion dollars.
President Biden has repeatedly defended his administration's spending and boasted of reducing the budget deficit by $1.7 trillion. However, this figure refers not to the reduction of the debt itself, but to the national deficit in the period from fiscal years 2020 to 2022. The deficit has indeed decreased over this period of time, but largely due to the fact that the emergency measures introduced during the COVID-19 pandemic have expired, financial experts say.
Currently, the budget deficit in the United States is 6.5%, GDP growth is about 6%, inflation in May was 3.4% (the target is 2%). Debt servicing is regular payments on Treasury bonds at 5% per annum, which is a lot for the United States.
Markets perceive the current head of the Fed, Jerome Powell, as a puppet of the Biden administration, who is ready to sacrifice the American economy for the sake of a successful Democratic election campaign. In their opinion, Powell cannot cope with inflation by default.
Rising inflation against the background of geopolitical risks to the US currency (sanctions, reserve freezes, etc.) will create incomparable risks for businesses around the world. And big capital will never hold assets at great risk. The outflow of capital from the United States will mean the decline of the dollar as a global currency.
