As the US national debt rises, some estimates suggest a possible $45 trillion level over the next couple of years.
The United States’ national debt has consistently risen since it hit and crossed $33 trillion last week. According to the weekly financial analysis publication The Kobeissi Letter, the US national debt has increased by more than $100 billion since then.
The Kobeissi Letter reported on September 19 that the national debt in the US hit record levels due to the effect of interest rate increases on the economy. The publication added that since the US debt ceiling crisis, the national debt jumped by $1 trillion each month. This means that every day since last week, the debt level increased by about $14.3 billion every day. With around $3 billion in daily interest expenses, The Kobeissi Letter noted a total of $17 billion per day. This is more than the market capitalizations of Cardano (ADA) and Dogecoin (DOGE) put together. In addition, the US national debt has increased by $11.5 trillion over the last five years.
The publication also noted that in addition to national debt, the deficit spending is so high that the US has issued bonds worth $2 trillion in 6 months. Unfortunately, since the debt ceiling will be unlimited until January 2025, these figures are likely to go higher. Some estimates suggest the debt will hit $45 trillion sometime in the next four years.
Inflation and Interest Rate Hikes to Affect US National Debt
The national debt issue is not exclusive to the US, as global debts have also hit a new record of $307 trillion. Unfortunately, the state of the dollar is giving observers cause for concern. Last week, officials at the US Federal Reserve decided to keep interest rates stagnant to reduce some of the ill effects of the rising rates. In addition, the Fed forecasted that inflation is likely to slow down with the possibility of a “soft landing”. This means that officials foresee a reduction in inflation that would not require heavy economic distress.
However, the Fed still believes another hike in interest rates might be necessary. Thankfully, the apex bank is trying to be a lot more careful with the increase. The last increase in July put the interest rates at a range of 5.25 to 5.5. The midpoint of the range is the highest the US has seen since 2001.
There is also speculation that it would take more than a few years before the US can return to very low rates. The Fed is likely to increase rates by another 25 basis points and may end its tightening cycle there. However, policymakers believe the benchmark short-term interest rate will remain above 5% in 2024 and at nearly 4% by the end of 2025. Although lower, the rate would still be about double of 2019’s figure.
The Fed hopes that inflation will be completely gone by 2026. It also believes that the US will return to possible economic growth by then. However, policymakers say rates will not return to levels seen before the COVID-19 pandemic. Unfortunately, this means that high-interest rates would remain.