US Debt Burden Grows – Could a Global Default Loom?

The rapidly rising level of US government debt is increasingly drawing attention from economic analysts. Observers warn that the fiscal trajectory could pose long-term risks to global financial stability. An actual default by the United States is currently considered unlikely, but in an extreme scenario it could have significant consequences for the global economy. (Source: gmx.net)

Total US public debt currently stands at around 38 trillion US dollars, equivalent to approximately 122 percent of annual economic output. Projections suggest that the debt ratio could continue to rise through 2050, with independent institutions expecting government debt to grow faster than the economy.

Economists see short-term risks primarily in political developments. Deadlock in Congress over budget decisions or raising the debt ceiling could delay government payments. Even a temporary delay in interest payments on government bonds would be considered a default by financial markets and could undermine confidence in US Treasuries.

A structural advantage of the United States is that government debt is issued in its own currency. This significantly reduces the risk of actual insolvency compared with countries that borrow in foreign currencies. However, financial stability ultimately depends on continued trust in the US dollar and in the independence of the Federal Reserve, which is responsible for maintaining price stability and currency strength.

At the same time, fiscal pressure on the federal budget is increasing. Interest payments on government debt have become one of the largest spending items and in some cases exceed other key areas of public expenditure. Experts warn of a potential debt dynamic that could restrict the government’s long-term financial flexibility.

A US default would have far-reaching international consequences, as US government bonds are widely regarded as safe assets and are held extensively by banks, governments and investors worldwide. Nevertheless, the US economy remains robust, and financial markets currently see no immediate risk of a global payment default.

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