ISTANBUL: The U.S. federal government's public debt has surged beyond 35 trillion U.S. dollars for the first time, a threshold that an expert has described as a sign of problematic borrowing.
Sant Manukyan, an analyst at Is Yatirim, the investment banking division of Isbank Group in Istanbul, told Xinhua that this borrowing does not benefit the economy and is far from healthy.
"If this debt was invested in areas that could make the economy more efficient and spur faster growth, the economy should have outpaced the debt costs over time, leading to a reduced debt ratio," Manukyan said.
"We are not seeing this outcome. In other words, this is not healthy borrowing or borrowing that benefits the economy," he said.
Manukyan anticipated that the Fed would likely lower interest rates in the short term amid an expected general economic slowdown.
However, he believes that the trend of high borrowing will continue. "Based on their performances, former President Donald Trump and Vice President Kamala Harris appear likely to continue this trend," the expert said.
Manukyan said the ongoing trend of high U.S. debt will impact the developing world and the global economy.
"American forecasts are crucial because they underpin the financial system; any problems here will inevitably disrupt pricing across the board," he said. "From that perspective, it's important to be cautious."
In the meantime, Manukyan does not expect the situation to lead the United States to undertake monetary expansion, which could result in higher inflation and likely provoke a strong reaction at home.
"In a worst-case scenario, similar to measures taken after World War II, the Fed might take steps to limit bond yields potentially setting a cap, such as above 5 percent, by purchasing bonds or implementing similar actions," he pointed out.
"Of course, none of these measures would be effective long-term solutions, as they would undermine market mechanisms and fail to produce sustainable results," Manukyan noted. "This is something that should definitely not be overlooked."
According to data released by the Treasury Department on Monday, the U.S. federal government's total public debt exceeded 35 trillion dollars for the first time as of last week. This followed the country's national debt surpassing 34 trillion dollars in late December 2023 and exceeding 33 trillion dollars three months prior.
(Xinhua)
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