The U.S. federal deficit has reached a record $31.5 trillion.
Many children are born in the United States today. And each of them has a debt of about $94,400 to pay, just by being born in the United States. If the calculation is then done on taxpayers, the individual debt becomes stellar: $246,867 for each taxpayer who pays taxes.
The debt-to-GDP ratio (on which Italy has been repeatedly mistreated by other countries), in the United States, rose from 34.52 percent in 1980 to 59.05 percent in 2000 and then to 120.37 percent in 2023.
Interest on the debt is currently worth $534 billion: which is the GDP of Sweden, just for comparison.
We became curious to investigate more about the holders of U.S. debt.
They are often said to be the Chinese, and since those who keep ranting about China’s great power and the coming downfall of American overpower cannot be believed, we went to verify that this is not so true. In fact, the primary creditor of the federal government is the set of other federal agencies: for example, the U.S. Social Security Administration, having a surplus balance sheet (we don’t know for how long, for now, it is), invests in state securities.
The complex of federal agencies holds an amount of Treasuries equal to the fantastic figure of $6.8 trillion.
Before banks and investors, foreign governments follow. And here, yes, China appears, but before China is Japan with $1.08 trillion. China comes next with $870 billion, second in governments.
So the supposed great dependence of the United States on China, in the end, compared to the mass of debt, is a pure fairy tale.
The portion of the ranking of governments holding U.S. debt, given below, will not cease to amaze you:
3. United Kingdom $645.8 billion
4. Belgium $332.9 billion
5. Luxembourg 312.9 billion $
6. Cayman Islands $283.3 billion (as in, the home of U.S. and non-U.S. tax evaders invest in Treasuries …)
7. Switzerland $266.7 billion
8. Ireland $250.0 billion
9. Canada 229.0 billion $
10.Brazil 225.9 billion $
Returning to the world’s largest economies, Japan’s debt-to-GDP ratio is 225.0%. China’s is 273.2%.
In fact, the world’s three largest economic powers stand on abysmal debt.
The U.S. Congress, divided as it is, is experiencing a very tense moment. In fact, in the United States, each of the two parties is itself divided in two, which makes everything much more complicated.
There are at least two things to worry about in the coming months: first, Congress will find an agreement on expanding the federal deficit, and second, there are no serious risks of the dollar losing its role as the world currency in the short term.
On second, although the diminished importance of the dollar in the medium term is inevitable, I would be fairly confident that this will not happen any time soon.
I confess that the news, at the moment, does not look good at all. And, together with some additional geopolitical issues, it is the reason why we see strong risk in the markets starting in May.
Low in March, recovery of about 60 days, and then a sharp decline from May onward into the summer.
The reality, we continue to believe that the low of Oct. 13, 2022 will continue to hold for quite some time, this, at least, is what we attribute the greatest probability to. From May onward, however, market distrust could be quite sustained, especially if we see excessive euphoria between late March and mid-May.
The Swiss SMI, the index of the top 20 listed Swiss companies, has a quieter and more moderate performance than almost all other European indices. It is also very precise in its movements and its performance has very rare jolts when compared with other world stock exchanges. It may be a good opportunity in an era of swirling ups and downs like the current one to go and explore what the Swiss stock market does: and you may get a very good surprise of good profitability with moderate risk.