The US national debt has surged over $800 billion dollars in just three months amid a fiscal warning from one of the world’s largest asset managers.
According to the U.S. Treasury Department’s Debt to the Penny system, the national debt hit an all-time high of $35.668 trillion on October 1st, up from $34.841 trillion on July 1st – an increase of $827.887 billion.
The new numbers come as Fidelity Investments warns the exploding national debt is now a “threat to Americans’ prosperity and security.”
Citing data from the U.S. Treasury Department, Fidelity says the debt-to-GDP ratio could rise from the current 123% to 166% in three decades with the growing interest expenses on the debt reducing the ability of the US government to spend on programs that stimulate economic activity.
“…rising debt will also threaten long-term economic growth by increasing the likelihood that taxes will have to go up significantly in the future. Higher taxes would likely reduce the ability of companies and consumers to generate economic growth by spending and borrowing.
Lower GDP growth would likely translate into lower corporate earnings and stock prices because stock prices are primarily driven by earnings.”
The trillion-dollar asset manager further says,
“Not only could rising debt lead to slower growth and more volatile markets in the long term, it also could lead to higher inflation if policymakers decide to cut interest rates to reduce the government’s cost of borrowing in hopes of avoiding tax hikes or unpopular cuts to Medicare and Social Security benefits. Lower interest rates and other expansionary monetary policies have historically helped fuel inflation.”
Over the long term, Fidelity says the high US national debt could have dire consequences.
“In the longer term, high national debt may mean reduced economic growth, higher taxes and inflation, lower investment returns, and cuts to popular Medicare and Social Security benefits.”
Fidelity Investments currently boasts of $14.1 trillion of assets under administration.
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