Brian Moynihan, CEO of Bank of America, is raising concerns about the U.S. national debt, which has now exceeded $35.7 trillion. This means every American would owe over $105,000 if the debt were divided equally. Moynihan, along with other prominent figures like Jamie Dimon and Fed Chair Jerome Powell, is urging political leaders to address the growing debt crisis. Unfortunately, their calls for action seem to be going unnoticed, especially as plans from potential future presidents—like Donald Trump and Kamala Harris—would likely increase the debt further.
The Mounting National Debt and Its Risks
Moynihan is worried about the country’s debt-to-GDP ratio, a key indicator of economic health. This ratio measures how much a country owes compared to what it produces. If this balance is off, it means the economy isn’t growing fast enough to handle its debt. Moynihan warns that without action, the U.S. risks losing its position as the world’s economic “gold standard.”
For years, there has been concern about the rising national debt. Then, the COVID-19 pandemic hit, and the government had to spend a significant amount of money to prevent a severe economic downturn. While this was necessary, Moynihan points out that the government now needs to focus on paying off that debt.
Political Inaction and Economic Warnings
Both the previous and current administrations have contributed to the debt. President Donald Trump added $8.4 trillion, with $3.6 trillion tied to COVID-related expenses. President Joe Biden has increased the debt by another $4.3 trillion, with over $2 trillion related to pandemic relief. Despite these figures, neither political party seems willing to tackle the debt issue head-on.
Moynihan argues that reducing the debt-to-GDP ratio requires tough decisions, including spending cuts, economic growth, or even tax changes. He emphasizes that while the U.S. economy is the envy of the world, it could lose this status if the national debt isn’t managed properly.
Gold as a Safe Haven
Amid growing concerns over the national debt, Bank of America has suggested that gold might be the last true safe investment. With the debt soaring, traditional safe-haven assets like U.S. Treasury bonds are no longer as reliable. As a result, gold is becoming more attractive to investors seeking stability.
In fact, gold prices have been hitting record highs, recently nearing $2,700 an ounce, and could soon reach $3,000. Central banks, too, are increasing their gold reserves to protect against economic instability. Over the past decade, their gold holdings have risen from 3% to 10% of reserves, and this trend is expected to continue.
The Bigger Picture: Debt and Global Stability
Bank of America’s warning goes beyond just the U.S. Other countries are also grappling with debt concerns, and gold is becoming a preferred asset for investors worldwide. As more people seek refuge in gold, it could lead to a significant shift in global investment strategies.
Looking ahead, the U.S. faces a potential fiscal crisis if it doesn’t balance its spending and growth. A report from the Congressional Budget Office estimates that by 2054, public debt could reach 166% of GDP, amounting to $141.1 trillion. Moynihan stresses that addressing this issue won’t require extreme measures but a consistent effort to narrow the gap between spending and revenue.
Americans Have Officially Run Out of Savings
For the last six quarters, the United States has been facing a troubling situation: the savings of households, businesses, and the government, compared to the country’s overall economic output (GDP), have gone negative. This means that for six straight quarters, Americans have been spending more than they earn, using up their savings.
This has only happened twice since 1947—once during the 2008 financial crisis and again in 2020 during the height of the COVID-19 pandemic. Both of these events caused major economic problems, and the current situation is raising alarms about the country’s financial health.
U.S. Federal Reserve has announced that household net worth reached an all-time high of $163.8 trillion in the second quarter of 2024. This rise is attributed to the increasing values of the stock market and real estate, along with ongoing economic strength.
The USA has surpassed India to become the world’s most expensive market, with India now in second place.
A record 87% of Americans now believe it’s a bad time to purchase a home, surpassing the 2008 peak by more than double. Even in the 1980s, when mortgage rates soared to 18%, only 79% shared this level of pessimism—8% lower than today’s sentiment, according to Reventure.
In summary, Moynihan believes that while the U.S. economy is currently strong, it faces serious long-term risks if the national debt continues to rise unchecked. To avoid a financial reckoning, policymakers must take action now, whether through spending cuts, increased growth, or other fiscal measures. If not, the U.S. could lose its status as a global economic leader.
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