Nassim Nicholas Taleb is famous for his book “The Black Swan,” but these days he is warning of a white swan, a risk that is not rare but rather somewhat more likely — and in this case, looming for the American economy. Like a growing number of economic observers, Taleb says the cause of this apparent disaster is the federal budget deficit. He says it swells so much that it will take a miracle to stave off the impending damage. And he is not alone. Taleb joined former U.S. Treasury Secretary Robert Rubin and BlackRock Vice Chairman Philipp Hildebrand in warning about the consequences of exploding debt – not to mention defaults – and what it could mean for the dollar's global status. “As long as Congress continues to expand the debt limit and make deals because they are afraid of the consequences of doing the right thing, there will eventually be a debt spiral,” Taleb said. “And a debt spiral is like a death spiral.”
The International Monetary Fund raised its forecast for global growth this year due to expansion in the US and fiscal stimulus in China. The global economy will grow 3.1% this year, up from 2.9% in October, the institution said on Tuesday. Tighter central bank policies to combat inflation and cuts in government spending in some countries are among reasons why growth is expected to be slower than in the two decades before the pandemic, when it averaged 3.8%. Still, given the magnitude of the Covid-19 price shocks and subsequent interest rate hikes, the IMF suspected that things could have been much worse. “The global economy continues to show remarkable resilience and we are now in the final slide towards a soft landing, with inflation steadily falling and growth continuing,” IMF chief economist Pierre-Olivier Gourinchas said. “But the pace of expansion remains rather slow,” he added, “and there could be turbulence.”
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