Experts warn that the enormous US federal debt is hanging over the top global economy as the sword of Damocles. However, Fed’s Chairman Jerome Powell decided to downplay the gravity of the situation and shift focus towards other burning issues. Recently, he spoke at a video conference before the Economic Club of New York.
In his speech, he expanded mainly on the labor market and a further course for ultra-easy monetary policy. Jerome Powell said in his virtual appearance that the US federal government was still far from being capable of financing itself when implementing its policies. Citing the official data, he added that the US budget deficit ballooned to $3.1 trillion in the fiscal year ending September 30 that has been the biggest one-year gap in US history. Thus, both the budget deficit and the federal debt have eclipsed on the back of large-scale stimulus measures taken by the government to safeguard the domestic economy from the pandemic fallout.
In fact, it is hard for the US authorities to prioritize the problems in the domestic economy which should be dealt with first. The US national output shrank 3.5% last year, the worst one-year contraction since World War II. The second sharpest slump was recorded during the financial crisis in 2008 when the US economy tumbled 2.5% on year.
Interestingly, some bitter political opponents of the US like Iran, Russia, and Venezuela seize on every excuse to highlight the problem of the humongous American public debt. However, Washington will hardly appreciate their expert advice.