Perspectives of American debt crisis: Ray Dalio, Ken Rogoff, Niall Ferguson Warnings

Investors’ concerns concerning swelling public debt The charge was appeased last week. But some experts say that the United States has not yet left the woods.

Goldman Sachs spoke with three main economic experts – Ray Dalio, Ken Rogoff and Niall Ferguson – debt level in the United States. All three said they were worried about an imminent debt criesespecially when you consider the effects of President Donald Trump GOP Tax and expenditure invoicewhich was estimated at billions at the budget deficit in the next decade.

This reflects a slightly more pessimistic view than the market. After a fear last month, the demand for public bonds for a long time was strong this week. It was a sign that investors feel more comfortable in the budgetary situation in the United States, after showing nerves last month after Moody’s degraded American debt And Trump tax invoice started to make its way through the congress.

Here are the best points that each experts had to do:

Ray Dalio, founder of Bridgewater Associates

The billionaire hedge feast manager said he sees three factors to determine the prospects for American debt.

1. How much the government pays for the interests of the debt compared to his income. If Interest payments Continue to increase, this can “prevent” unacceptable “the government from spending money on other things.
2. How many debt the government must sell compared to the demand. If the government needs to sell more treasure than people are ready to buy, interest rate will have to increase. This provides more attractive return to investors to keep American debt, but high rates also harm markets and economics.
3. How much money the central bank needs to print In order to buy the remaining debt. If the request for an American treasure is particularly low, the Fed can take place to buy obligations to maintain the funded government. If it owes Print more money To do this, this can increase inflation and ding the value of US dollar.

“You can easily measure these signs of deterioration and see the movement towards an imminent debt crisis”, Dalio, which has long warned against the disorders debt dynamic in the WEsaid. “Such a crisis occurs when the constriction of expenses financed by debt occurs, as an economic heart attack induced by debt.”

To prevent a crisis, Dalio said he thought the government should reduce the budget deficit at 3% of GDP. Debt reduction could lead to a drop in interest rates of approximately 150 basic points, he said, reducing payments of interest on national debt and stimulating the economy.

Ken Rogoff, professor of Harvard and former IMF chief economist

Given Trump’s current agendaRogoff thinks that the United States will probably go into a debt crisis in the next four to five years. It was faster that the calendar of five to seven years that he planned before Trump’s re -election.

“The idea that debt is a free lunch that had been pushed by many economic observers is absurd,” said Rogoff. “The larger deficit of today in addition to the already high debt levels is set up for a crisis that will require a significant adjustment.”

Rogoff thinks that a debt crisis could be played in two ways:

1. Inflation peaks and leads to an economic shock. “Exactly what this shock will look like it is difficult to say, but it will probably be more painful than the cocvid inflation shock which has only precipitated relatively minor adjustments on the bond markets,” said Rogoff.
2. The government could manage debt By keeping the interest rates artificially low and limiting the capital flows. But these measures will harm economic growth and serve essentially as a savers in the economy, he said.

Investors have long been concerned with American debt, but the prospects are particularly worrying now because long -term interest rates go through “normalization” from low levels that have extended over the past decade, said Rogoff.

“People must recognize that higher interest rate are there to stay and that a return to the low rate of the past could well prove a vow vice, “he added.

Niall Ferguson, historian and Harvard researcher

Ferguson thinks that a crisis could be triggered by a military challenge that makes the United States lose its position of global power because it deepens.

British-American financial historian said his favorite gauge to determine how unbearable national debt was when a country spends more in payments of interest than defense.

This rule, which he calls “Ferguson’s law”, now applies to the United States, which spent 1.1 billion of dollars on interest on national debt during the 2024 financial year, according to the Treasury Department. It was more than the 883.7 billion dollars approved this year for the total defense expenses.

Almost all countries that have violated Ferguson’s law have lost its status as “great power” in the financial markets, he said.

“All great power that pursues a fiscal policy By allowing the cost of its debt to exceed the cost of its armed services opens to challenge, “said Ferguson.” The United States is just the last great power to find itself in this tax jam. “”

The United States has been able to borrow as much as now without problem, in part because the US dollar There remains the reserve currency of the world and investors always see treasurers like “safely“Said Ferguson, which means that they have confidence in the ability of the United States to compensate for its interests.

But that already seems to change, he said, pointing to investors from around the world to lose their exhibition at Treasurys American And Go away from dollars.

“I warned that the United States has been on an unbearable tax path for 20 years now, and therefore sometimes I felt like the boy who cried” Wolf “,” added Ferguson.