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⚠️ The default season is over, but the problems remain
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🇺🇸 The theme of the financial collapse in the United States is not relevant yet, but this thriller will definitely continue. Judging by the growth rate of public debt, a fantastic level of $50 trillion will be considered «normal» in 5-7 years.
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Of course, the presence of public debt is not considered a problem for the country's economy as long as the government can pay for it. However, servicing the US public debt is gradually becoming a major cost item.
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In 2022, interest payments to holders of US government bonds amounted to $475 billion, which is 8.1% of budget expenditures. In 2023, the amount could rise to $700 billion due to the Fed's rate hike. At this rate, interest payments will soon exceed $1 trillion. per year and around 2030 will amount to more than 20% of US budget revenues. And it's not just bad – it's really dangerous.
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Against this background, two questions arise:
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• When will the rating agencies take the risk of lowering the US rating?
• When will central banks (and not only!) start to get rid of American treasuries as part of their assets?
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There are no answers yet.
Speculators took a short pause, but the general situation has not changed: we are waiting for the standard problems with rates, a recession, the banking sector, huge corporate debts and
defaults. So you won't be bored.
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I wonder what in the modern world can be considered an adequate alternative to dollar assets:
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• Gold? Based on history, no.
• Bonds of large countries (eg Germany or France)? Too small volumes.
• China (currency, shares, raw materials)? Alas, there is also a huge public debt, corporate debt (over 200% of GDP) and the government-controlled yuan.
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And what do you think? Submit your options!
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Profits to y’all!