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BRICS: US debt could crush the dollar

28.03.2024 7:00 2 min reading
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BRICS: US debt could crush the dollar

Amid ongoing efforts by the BRICS alliance to de-dollarize, the US government has expressed concern about the potential impact of rising debt on the stability of the dollar.

Recently, the Congressional Budget Office (CBO) published a long-term budget forecast highlighting the risks associated with the current fiscal trajectory.

CBO specifically indicated that if spending patterns remain unchanged, the budget deficit will grow significantly relative to gross domestic product (GDP) over the next three decades. In addition, the service warned that failure to address this issue could increase the likelihood of a fiscal crisis, which would pose a threat to the stability of the dollar.

Over the past year, the global economy has shown an increasing tendency towards currency diversification on a wider scale. While the US dollar continues to serve as the world's reserve currency, it faces increasing challenges. Many central banks actively increase their gold reserves and encourage the use of local currencies to mitigate the potential effects of a possible weakening of the dollar.

Recent statements by official representatives of various countries have only increased fears about this scenario, especially against the background of the BRICS alliance's efforts to de-dollarize. CBO's long-term outlook emphasizes that such a significant and growing debt burden would have significant economic and financial consequences.

At the end of 2023, the US federal debt stood at $26.2 trillion, equivalent to 97% of GDP. CBO projects that this ratio will continue to rise, potentially surpassing the highs seen during World War II, reaching 116% by 2029 and likely rising to 166% by 2054 if current trends persist. As of this writing, the US debt stands at $34.6 trillion.

In a conversation with the Financial Times, CBO Director Philip Swagel pointed out the risks facing the US currency. Drawing parallels with the UK's experience in 2022, Swagel highlighted the potential market implications of government action, citing the collapse of the British pound against the dollar following the economic policy changes announced by then-prime minister Liz Truss.

Swagel and the CBO stressed the importance of addressing the debt issue immediately, warning that delaying action could lead to similar challenges for the US, with potentially far-reaching consequences for the world's reserve currency.

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2 Responses to “BRICS: US debt could crush the dollar”
  1. A necklace,

    While the whole world works with the dollar, the only possible development is for the dollar to crush the world!

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