The American debt is now $ 37 – should we worry?

Since Donald Trump rejoiced the passage of his self -taught and officially named, a great wonderful budgetary bill through Congress this week, we long sowed us on the scale and sustainability of us, which borrowed the rest of the world.

The Trump’s tax reduction bill is expected to add at least 3 trillion dollars (2.2 trillion pounds) to the already eye in the US, which overcomes $ 37tn (£ 27tn). The critics of this plan lack, not least Trump’s former ally Elon Musk having called it a “disgusting abomination”.

The growing debt leaves some to think about whether there is a restriction on how much the rest of the world is borrowed from Uncle Sam.

These doubts have recently appeared in the weaker cost of the dollar, and higher interest rates require borrowing money to America.

It is necessary to borrow this money to make a difference between what it earns and what it spends every year.

Since the beginning of this year, the dollar decreased by 10% to a pound and 15% against the euro.

Although the cost of borrowing in the US is stable overall, the difference between interest rates paid on long-term loans compared to the smaller terms, which is known as the profitability curve-has become or penetrates, signaling the increase in long-term US borrowing stability.

And this, despite the fact that the US has reduced interest rates more slowly than the EU and the UK, which will usually make the dollar stronger as investors can get higher interest rates in bank deposits.

The founder of the largest hedge -fashion in the world Ray Dalio believes that the United States borrows at the crossroads.

According to him, he estimates that the United States will soon be spent 10 -year -olds on loan and paying interest.

“I am sure that the financial state of the US government is in a bend because, if it is not resolved now, debts will increase to the level where they cannot be managed without a great injury,” he says.

So what can this injury look like?

The first option is a sharp decline in public expenses, a large increase in taxes or both.

Ray Dalio suggests that the budget deficit reduction from 6% to 3% may soon abandon the problems.

The new Trump budget bill has reduced some costs, but it also reduced taxes, and therefore the current political trajectory goes the other way.

Secondly, as in the previous crises, the Central Bank of the United States could print more money and use it for the redemption of government debt – as we saw after the 2008 financial crisis.

But this may eventually reinforce inflation and inequality, as assets owners, like houses and stocks, do much better than those who count on the cost of work.

The third is a simple default in the US. Can’t pay not pay. Given that the “full faith and loan of the US Treasury” underpin the entire global financial system, it would make a big financial crisis like a picnic.

So, how likely is something from this?

Now, merciful, not very.

But the reasons why not really so consoled. The fact is that we like or not, there is little alternative to the dollar in the world.

Economist and former Suprem Bond Mohammed El-El-Erian told the BBC that many are trying to reduce the dollar: “The dollar has overweight, and the world knows it, and so we watched gold, euro and pound, but it is difficult to move on a scale, so there are very few places to go.”

“The dollar is like your pure dirty shirt, you should continue to wear it.”

However, the future of the dollar and the landmark in the world – US government bonds – is discussed at the highest levels.

Recently, the governor of the Bank of England told the BBC that the US debt level and the dollar status “very largely on the mind of the US Secretary Socialist.

$ 37tn debt is an incomprehensible number. If you have saved a million dollars daily, you will need 100,000 years to save so much.

A reasonable way to look at the debt is the percentage of the country’s income. The US economy brings a profit of about 25 million a year.

Although its debt to income levels is much higher than many, it is not as high as Japan or Italy, and benefits the most innovative and wealth that creates the economy in the world.

At home, I have a book called Death of the Dollar from William F Ricenbert, in which he warns of the risks of the dollar status as a reserve currency in the world. It was written in 1968. Mr. Rickenbeker is no longer with us – the dollar.

But this does not mean that its status and value are divine law.