U.S. Debt Worries Fed Chairman Powell – Fears May Be Confirmed in March
As we enter 2019, the U.S. national debt continues to grow, approaching $22 trillion with global Government debt sitting at $72 trillion.
It seems like the 21st century is hitting the U.S. with a debt “haymaker,” according to CNBC (emphasis ours):
U.S. debt began accelerating at the turn of the 21st century. The total jumped 85 percent to $10.6 trillion during former President George W. Bush’s two terms, another 88 percent to $19.9 trillion under President Barack Obama and has risen 10 percent during the first two years of President Donald Trump’s term.
And even though the U.S. economy may be growing, the sustained annual deficit exceeds $1 trillion. This is concerning economists, including Chairman Powell:
I’m very worried about it… It’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face.
If a recession hits (and signals are potentially pointing towards one), then having that amount of sustained deficit could be devastating.
And since the Fed is partially responsible for creating this debt problem, it seems odd for Powell to call it a “long-run” issue when it’s more of a “right-now” issue.
According to a recent CNBC article, normally when the deficit is expanding, the “Fed would be lowering rates”. But they aren’t. In fact, rates have been on a steady rise for the last few years.
At the global level, the picture isn’t much better. Debt has reached record levels, double what it was in 2007.
This is “leaving many countries poorly positioned for financial tightening as global interest rates begin to move higher,” says James McCormack, Fitch’s global head of sovereign ratings, in a statement.
Powell and other economists have every right to be concerned, because both debt and deficit spending may be spiraling out of control.
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