Finance professor sees America's $34 trillion debt burden roiling global financial markets – Fortune

KUALA LUMPUR (March 4): A finance professor has predicted that America's US$34 trillion (RM160.6 trillion) debt burden will roil the world's financial markets as soon as next year – should a president-elect announce a series of expensive measures .

In a March 3 report, Fortune.com quoted Wharton Business School finance professor Joao Gomes as saying he sounded a warning call that many of his colleagues have so far ignored: America's growing national debt pile.

Be careful, don't ring the bell alone

According to Fortune, the warning isn't just a beep.

It is said that a growing cacophony of alarm bells has been ringing since the start of the year: JPMorgan Chase CEO Jamie Dimon says there will be a market “rebellion” on the issue, while Bank of America CEO Brian Moynihan says says it's time to stop “admiring” the problem and start doing something about it.

“I'm probably more worried about U.S. debt than most of my professional colleagues.

“But in this election year, I believe voters should be asking much tougher questions of politicians who don’t take this threat seriously,” Gomes said.

According to Fortune, presidential candidates Donald Trump and Joe Biden are both struggling with a struggling economy trying to cope with a global pandemic.

Franklin D. Roosevelt, of course, fought the Great Depression and then oversaw American entry into World War II.

Gomes believes that regardless of who contributed to the chaos, one party must bear responsibility for cleaning up the chaos.

“We will have to deal with this towards the end of the decade.

“Frankly, it could derail the next government. If she comes up with plans for big tax cuts or some other big fiscal stimulus, the markets could rebel, interest rates could skyrocket right there and we would see a crisis in 2025.”

“It could very well happen. I am very confident that we will get there by the end of the decade, one way or another,” he said.

Gomes believes this will happen at the political level when the parties buying debt decide that the model is simply no longer sustainable.

This could even be triggered by government measures announced at the start of the next administration, in turn unsettling a market that comes with a high price tag.

“The most important thing about debt for people is that they need someone to buy it,” Gomes told Fortune.

“We used to be able to rely on China, Japanese investors and the Fed [buy the debt]. All these players are slowly disappearing and are now actually being sold.”

America's ability to pay off its debt is a concern for nations around the world that hold a share of the $7.6 trillion in funds.

The countries most at risk are Japan, which had $1.1 trillion as of November 2023, China ($782 billion), the United Kingdom ($716 billion), Luxembourg ($371 billion) and Canada ($321 billion).

“If these people who have been happy to buy government bonds from major economies decide at some point, 'You know what, I'm not really sure this is a good investment anymore.'” I'm going to demand a higher interest rate, um “To be convinced to keep this, then we could have a real accident,” Gomes said.