America is today at the most critical point in its modern
history. It is threatened with a collapse which, if it happens,
will drag most of the world down.
The U.S. debt has now, amid high inflation, rising
interest rates—most economic analysts expect the U.S.
central bank to continue raising rates—and growing
economic uncertainty, in September 2023, topped $33 trillion
and amounts to 124% of GDP. And the deficit of the general
government – which is the federal and local government
together – is over 7% of GDP. This level of debt is more than
three times the level of debt in 2008 ($10 trillion) and 10 times
the level in 1990 ($3.2 trillion). US debt levels have ballooned
significantly in recent years, especially after a 50% increase in
federal spending between fiscal years 2019–2021, according
to data from the US Treasury Department.
This stark reality resulted in the House and Senate
passing necessary legislation in early June 2023 that raised
the ceiling on federal borrowing while imposing some limits
This, of course, was done in order to prevent a
catastrophic bankruptcy of the government, i.e., the scenario
of the country declaring default, unable to pay its creditors
and pay salaries and pensions, which would obviously have a
catalytic negative impact on international markets, as well as
in the American and global economy, given the size of the
In particular, the agreement on the debt allows the
suspension for two years, until January 1, 2025, i.e., the
period after the extremely critical for the entire planet
presidential elections in November 2024, the maximum
borrowing limit of the American public (31.4 trillion dollars).
The world's largest economy, however, was once again
faced with the prospect of a government shutdown. So,
Congress recently passed the short-term funding bill to avoid
a government "shutdown" (i.e., US bankruptcy) just hours
before the deadline and ensures funding through November
17, while ruling out any new aid to Ukraine. A government
shutdown that would furlough tens of thousands of federal
employees without pay and suspend various government
services would begin at 00:01 ET (04:01 GMT) on Sunday
10/1/2023. An exception, however, would be personnel
required for state functions such as defense, police duties or
other vital functions, who would remain on duty without pay.
The recent 45-day deal to keep the government open has
thrown up a risk from October to November—a point where it
could end up doing more damage to fourth-quarter GDP
numbers. Bloomberg Economics estimates that each week of
shutdown shaves about 0.2 percentage points off annual GDP
growth, with most but not all recovered once the government
At the same time, in March 2023 three banks in the
United States of America with significant activity in the field of
technology and cryptocurrencies collapsed. Specifically,
these are Silvergate Bank, Silicon Valley Bank and Signature
Bank. This was followed by the collapse, takeover and closure
of another bank, First Republic Bank, in May 2023.
There are currently 725 US banks on the FDIC's death
list. The strain on the financial sector caused by bank failures
remains a threat. The banking crisis is not a problem of
quality of credit conditions, but is caused – now – by the
inability to finance the ever-expanding US debt.
In addition, some new threats threaten to derail the
American economy. September's selloff in stocks pushed the
yield on the 10-year note to a 16-year high of 4.6%. Borrowing
costs higher for a longer period of time have already sent
equity markets tumbling. They could also jeopardize the
housing recovery and deter companies from investing.
Also, many financial analysts are calling the impending
reactivation of federal student loans, after the end of a 3 1/2-
year pandemic freeze, a potential shock to the economy.
Nearly 44 million borrowers will start paying an average of
$393. Inevitably, this will mean less spending elsewhere, at
least for some households.
Since September 15, moreover, the United Auto Workers
union has been engaged in a historic strike against Detroit's
three major automakers: Ford, GM and Stellantis N.V., which,
according to a study by the Anderson Group, in just one
week, cost the US economy over $1.6 billion.
At the same time, oil price crises have typically,
throughout US history, helped trigger recessions. In other
words, the oil price crises were followed by a recession. High
black gold prices increase costs for a wide range of
companies and strain consumer budgets, leading to higher
inflation and lower consumer spending. It is a recipe for
economic disaster that the world is being asked to face once
It should also be noted that oil prices have soared since
June due to production cuts by the world's largest crude
producers (OPEC+, which includes Russia and Saudi Arabia).
International benchmark Brent crude oil prices rose 28% from
their June 11 low of $74 a barrel to over $95 a barrel, speeding
toward $100 a barrel.
But events in the rest of the world could also drag the
US down a downward path. The world's second largest
economy, China, is mired in a real estate crisis. In the euro
area, lending is shrinking at a faster pace than at the nadir of
the sovereign debt crisis, a sign that already stagnant growth
is set to move lower.
In closing, I would like to emphasize that the horizon in
the American economy and in the markets is becoming
increasingly dark. The dark clouds in the financial sky are
thickening, naturally causing worry and fear, and foretelling
that the storm will, unfortunately, not be long in coming.
Isidoros Karderinis was born in Athens in 1967. He is a
journalist, novelist and poet. He studied economics and
completed postgraduate studies in tourism economics. His
articles have been published in newspapers, magazines and
websites around the world. His poems have been translated
into English, French and Spanish and published in poetic
anthologies, literary magazines and literary newspaper
columns. He has published eight books of poetry and three
novels in Greece. His books have been translated and
published in the United States, Great Britain, Italy and Spain.
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