Debt and Challenges to the Dollar Are Biggest Risks to U.S. Economy

There’s a problem affecting the U.S. and world economies, which everybody likes to ignore. The problem is debt and the effect will be a debt crisis.

It’s as much a global crisis as it is a U.S. debt crisis. Successive governments and administrations have ignored the piling debt problem. President Barack Obama almost doubled U.S. debt.

In his defense, Obama had little, if any, choice. He started his presidency in the wake of the worst financial crisis since the Great Depression.

Indeed, nobody has a choice. To even admit that there’s such a thing as a debt crisis would be to concede defeat. Any president who would even dare confront the issue would be committing political suicide.

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Debt Accumulation Continues

It’s no surprise then that President Donald Trump’s administration has also been accumulating massive amounts of debt, adding to the already huge U.S. financial burden.

Those looking for the secret of the bull stock market that keeps on giving need look no further than the tax cuts.

The White House assured the naysayers and Cassandras, who expressed concerns, that economic growth would offset the tax cuts. In fact, the idea was to increase tax revenue by encouraging economic growth to such a level as to allow for the much-promised infrastructure spending.

However, the rest of Trump’s agenda does not match this logic. Protectionism, tariffs, internal tensions, and risk of impeachment are hardly contributors to growth.

The military-industrial companies may be the biggest beneficiaries of Trump’s policies, thanks to heightened geopolitical tensions.

The Debt Crisis Is Already Underway

Still, even those are distractions, and perhaps deliberate, to cover up President Donald Trump’s biggest economic problem: the debt crisis.

Until debt reaches the stock market, few will discuss it. And that’s the most dangerous aspect of the problem. Debt has already started to threaten Wall Street.

The Federal Reserve’s policy of raising interest rates has made U.S. debt—both national and private—more expensive. Sooner or later, investors will pull away from higher-risk equity markets to focus on Treasuries or similar “safer” investments.