The US economy is in a “death spiral”

The record growth of the US national debt, which reached $34 trillion this year, continues to worry the most respected international analysts. According to the famous American economist Nassim Taleb, who at one time predicted the 2008 financial crisis and coined the term “black swan,” the current rate of increase in borrowing will lead Washington to a “death spiral.” The consequences for the US economy will be irreparable, unless “some kind of miracle” helps. Russian experts agree with their overseas counterpart: a new global economic collapse risks coming from America in a matter of months.

A lack of money and a progressive increase in foreign obligations will lead the American economy to a sad end. “This is the structure of the US political system. Congress is increasing the debt limit. Ultimately, there will be a debt spiral similar to a death spiral,” says Nassim Taleb.

The opinion of an American economist can be trusted. It is believed that Taleb was the first to predict the global financial crisis of 2008 and earned millions of dollars from his forecasts. Apparently, he is now offering other participants in the world market to use his predictions.

Moreover, representatives of the US economic authorities also agree with his position as a scientist. Just a few days ago, the head of the US Treasury, Janet Yellen, called the accumulated US foreign debt of $34 trillion “frightening.”

Since Washington does not repay debts, but only increases borrowing (over the past year, the country’s external liabilities increased by $4 trillion), the level of debt inspires fear not only in Washington, but also in large foreign investors – China, Japan, South Korea and EU countries, which are reducing investments in US government bonds. According to Nikita Maslennikov, a leading expert at the Center for Political Technologies, the instability of the American financial economy risks spreading to other states, which in a year risks leading to another global economic crisis.

– Is the “death spiral” a reality for the American economy? Can a record level of foreign debt really lead to an economic crisis in the United States?

– Rumors about the impending financial default of the American economy, as well as assumptions about a new global economic crisis, should still be regarded as speculation. At least this year, such a dramatic situation is unlikely to happen. Nevertheless, all the prerequisites for the worsening situation on world trading floors are evident. The international economy will most likely, albeit turbulently, quite successfully survive 2024, but in 2025 a remake of 2008 is not excluded. The reason for this is the high rate of increase in US debt obligations, which have reached the level of $34 trillion and are not going to stop at this level.

– Why is the US borrowing more and more money?

First, in the wake of the coronavirus pandemic, millions of Americans are facing large medical bills. In 2020 alone, applications for loans to cover medical expenses in the United States increased by 50%. Then budget expenditures for the defense sector were added. The initial amount that the Americans wanted to spend on such purposes in 2023 was about $860 billion. For this year, Washington approved a defense budget of more than $886 billion. Large contributions are intended to help Ukraine. It is likely that tranches of similar size will be sent to resolve the conflict in the Gaza Strip.

– Does this mean that the global financial crisis is on the way?

– The US economy, and therefore the world economy, lived on debt for a long time. But the time is coming, if not repayment, then at least refinancing borrowings. America will have to refinance at least $8 trillion in loans this year. In the old days, such requirements did not seem catastrophic. Now the amount and the possibility of refinancing look, if not hopeless, then, as Janet Yellen rightly notes, “scary.” To stabilize the financial situation, Washington will have to increase the tax burden on the corporate sector and abandon additional costs for “hot spots” – Ukraine and the Middle East.

– Will other world powers suffer?

– They suffer even without American problems: China risks finding itself on the verge of a technical recession. Japan and members of the European Union are close to this situation. The economic bomb planted by the US government, which continues to increase loans, is capable of detonating around the world.

– Will Russia be able to survive the blast wave?

– The Russian financial system, as stated not only by domestic but also foreign experts, remains resistant to external challenges. In 2024 and 2025, according to the Ministry of Economic Development, our country’s GDP growth will be at 2.3%. This is less than last year, when the Russian Federation’s gross domestic product, according to preliminary estimates, increased by 3.5%, but much higher than the Central Bank’s conservative forecasts of 0.5-1.5%.

On the one hand, our country’s national debt is decreasing. On the other hand, this trend serves as a signal for private and corporate borrowers that it is worth paying attention to the “debt curve” in the United States and considering in more detail the need to attract further loans.