Hello,

The US opened the doors to 2025 with an economy that’s booming. But there’s an elephant in the room that neither side of the political spectrum wish to tackle – the national debt. In Times Square, there’s a National Debt Clock that constantly displays the updated total figure, ensuring the debt literally hangs over the public. In 2008, the clock stopped when it ran out of digits – the national debt had ticked over $10 trillion. Today, that number is north of $36 trillion, around $105,000 for each US citizen. But the growing fiscal imbalance was scarcely mentioned on either side of the campaign trail during the election. Why? Because both parties intended to increase, rather than amend, federal debt.   

 

So, when will it matter? The Trump administration doesn’t seem overly concerned, recently calling for the debt ceiling to be extended. In fact, the federal government has only run a surplus four times in the last 50 years, the last being in 2001, and the debt ceiling has been raised 19 times since then. However, something that can keep investors sanguine is context. The US owes debt in its own currency, which limits its vulnerability to a liquidity crunch. Furthermore, while the total is incomprehensibly large, as a percentage of GDP the debt is not as outlandish and fairs better than developed peers Japan and Italy. But this percentage is on the rise, and Trump’s policies are expected to be acceleratory. A lesson that is often harshly learnt: debt never really matters – until it really does.  

 

As always, if you wish to discuss anything in further detail, please do get in touch.