While the latest IMF forecasts were mostly lost in the din surrounding the start of earnings season, besides the now standard cuts to global growth forecasts, there was one standout item.
As National Bank of Canada points out, the IMF's projections forecast U.S. net debt to rise from 95% of GDP in 2023 to 110% by 2028, which actually is a conservative estimate when comparing a similar, if even more concerning longer-term forecast from the Congressional Budget Office, which effectively projects hyperinflation.
But while the fate of US debt/GDP in 2050 may feel like someone else's problem to most Americans, NBC warns that a far more pressing issue may emerge as soon as a decade from today. That's because unless Washington raises taxes more or slashes benefits (an unlikely outcome), the Social Security fund will hit net zero - i.e., will be exhausted - in just 10 years.
And as U.S. social security becomes a pay-as-you-go system, sovereign debt issuance will increase at an accelerated rate to offset the statutory decline in the social security fund balance. That, combined with the global "Net Zero" cost forecast of $150 trillion over the next 30 years - or some $5 trillion per year - most if not all of it courtesy of the Federal Reserve...
... means that in the very near future, the Fed will be drawn back in to monetize debt (read restart QE) at a pace that has never been seen before. The only question is which crisis will get us there first.
By Zerohedge.com
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Therefore, based on the above, the IMF’s projection that US net debt to rise from 95% of GDP in 2023 to 110% by 2028 isn’t only extremely underestimated but is also grossly inaccurate. US debt is projected to hit $46.6 trillion by 2028 or 150% of a GDP estimated to reach $31.0 trillion in that year.
This deteriorating fiscal trend is causing the dollar to continue to lose value thus threatening its dominance in global trade and as a global reserve currency and also in the global oil trade
Therefore, it isn’t unrealistic to expect the yuan to replace the dollar as the world’s main reserve currency within the next 1-2 decades with the petro-yuan replacing the petrodollar as the dominant global oil currency.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert