The U.S. spends almost a third of its revenue on interest payments alone, and it doesn’t seem like it can afford to pay much more.In the short decade since 2008, the national debt, ever on the rise, has jumped from $10.6 trillion to $22 trillion. It also comes with a deficit that’s currently over $1 trillion currently. The interest payments alone may be forming a “black hole” from which the U.S. may never escape.
These facts alone should raise concern in any interested observer.
At least two billionaires are doing just that, starting with Baupost Group’s Seth Klarman. Baupost Group is a $28 billion hedge fund, and Klarman normally positions himself out of the limelight. His fund is only open to private investors, so he has little incentive to promote his brand to the public.But recently, he felt the need to write a warning to investors about the global debt, with specific reference to the U.S., according to Sovereign Man:
In a 22-page letter to his investors, Klarman warned that government debt levels, particularly in the US (where debt exceeds GDP), could lead to the next global financial crisis.
“The seeds of the next major financial crisis (or the one after that) may well be found in today’s sovereign debt levels,” he wrote.
In the same letter, Klarman continued: “There is no way to know how much debt is too much, but America will inevitably reach an inflection point whereupon a suddenly more skeptical debt market will refuse to continue to lend to us at rates we can afford…”Since the U.S. spends almost a third of its revenue on interest payments alone, it doesn’t seem like it can afford to pay much more.
And Klarman isn’t the only billionaire expressing unease. At the World Economic Forum in Davos, Switzerland, Ray Dalio, founder of the world’s largest hedge fund, said that debt would be to blame for the next downturn, which he believes will be bigger than the Great Depression.
“The biggest issue is that there is only so much one can squeeze out of a debt cycle and most countries are approaching those limits”.
You might think the U.S. government would do everything to curb this problem, but Uncle Sam’s total debt is rapidly approaching $22 trillion, and according to the Congressional Budget Offices latest ten-year projection, it will be more than $33 trillion by 2029, with $1 trillion annual deficits set to begin again and stay above that for as far as the fiscal eye can see.
Skyrocketing debt, check. Deficit to match, check. Or will it be checkmate?
Although I’ve stated this twice before in this piece. let me reiterate — The U.S. spends almost a third of its revenue on interest payments alone. America and Her people cannot afford to pay much more.
WE’VE ARRIVED AT THE END OF THE LINE.