Bank of America cited data from the Congressional Budget Office (CBO) in a report on Tuesday, stating that the US government debt is expected to exceed $50 trillion by 2033.
Michael Hartnett, an investment strategist at Bank of America, stated that the US public debt balance is currently $33.6 trillion and is expected to surge by $20 trillion to $54 trillion over the next decade.
The public debt of the United States... is more than the combined GDP of China, Japan, Germany, and India, "he wrote, adding that over the next 10 years, the outstanding debt of the United States will surge by $5.2 billion per day, or $218 million per hour.
While the US debt soared, the federal deficit also exploded. The budget deficit of the United States in the 2023 fiscal year was $1.695 trillion, an increase of approximately $320 billion or 23% compared to the previous fiscal year. This forced the US Treasury Department to auction trillions of dollars of treasury bond.
In addition, the soaring bond yields have led to a surge in annual interest expenses, further exacerbating the debt burden. These expenditures account for an increasing proportion of the federal budget, and the deficit is also expanding.
Media analysis shows that as of the end of last month, the annual interest expenditure of US treasury bond bonds was estimated to have exceeded $1 trillion. In the past 19 months, this number has completely doubled, equivalent to 15.9% of the total federal budget for the fiscal year 2022.
The Federal Reserve may step in to rescue the government
Bank of America stated that as long as US policymakers continue to borrow heavily, causing the government's outstanding debt to continue to increase, investors will worry about lingering risks such as inflation, bond defaults, and currency depreciation.
Hartnett said, "In the coming years, the central bank may rescue the government through quantitative easing and the introduction of yield curve control (which is unfavorable to the US dollar)
Ed Yardeni, a market veteran and president of investment consulting firm Yardeni Research, also warned on Monday that the recent rebound in the price of US treasury bond bonds does not mean that the US debt crisis has ended.
He pointed out that due to concerns about the growing debt size of the United States, "bond market vigilantes" - bond market investors who sell bonds to force Congress to reduce the fiscal deficit - will continue to attack.
It is worth noting that investors should not expect the US government to stop borrowing, as a reasonable increase in debt size can help drive economic growth and currency circulation. In 1835, the US government paid off all its interest bearing debts for the only time, and then fell into a two-year economic depression.