Sputnik: The United States’ national debt has exceeded $26 trillion for the first time in American history, Treasury data revealed. What does this number tell us about the current state of the US economy? What will be the ramifications of this, if any?
Tom Luongo: The U.S. economy is in terrible shape thanks to unfolding global financial crisis as well as the catalyst of the COVID-19 response. Locking down the economy only intensified a crisis that was already unfolding, making it far worse than it should have been.
The U.S. will run a primary budget deficit of more than $4 trillion this year, above 25% of GDP, at levels not seen since WWII.
And in some ways that has to occur given the circumstances because the world is biblically short of dollars as the Fed’s weekly balance sheet statement tells us. The demand for dollars is still very high and as the quality of the debt repayable in dollars deteriorates around the world, that demand will only intensify from here.
So, this was always going to occur, the question was always to what extent and spread out over what time period. COVID-19 accelerated both the severity and the timeline of events.