Washington, (Asian independent) The US economy seems to be heading the China way with a burgeoning debt outweighing slow growth as the spurt in federal spending since 2021 touches a whopping $8 trillion. Also, the dollar’s reign as the unipolar global currency is threatened with regional blocs in Asia and Europe wanting to trade in local currencies.
The US economy could face a “long, slow grind” as huge debts take their toll. There has been $8 trillion in new federal spending since 2021.
“Many nations have come to regret massive stimulus campaigns, as the resulting debts weighed on growth,” UK’s Financial Times reported.
Americas “mini growth miracle” spurred by trillions of dollars in government spend may turn out to be a burden on the US economy eventually.
According to the Rockefeller International chair the US economy’s resilience against aggressive rate hikes from the Federal Reserve was indeed surprising.
The foundation however warned the spurt in federal spending — and debt — under the Biden administration will eventually take its toll, report said.
Many nations have come to regret massive stimulus campaigns, as the resulting debts weighed on growth. Big spender China was credited with ‘saving the world’ after 2008 global meltdown, but it has experienced slow growth since then.
“Post-miracle, the US will face similar headwinds. When the stimulus and other temporary boosts wear off, the American economy could settle into a long, slow grind,” the Times observed.
An anti-dollar drive spearheaded by Asia has spread to Europe, with France growing sour on the greenback’s dominance.
Economic experts feel the emergence of regional groups such as BRICS, SCO, ASEAN, pose a great threat to the US greenback as trading within the groups start rising.
The dollar’s supremacy in global trade faces fresh challenges as several countries float plans to use local currencies in commerce.
Russia and Iran are working to create a gold-backed stable coin, while France has pursued a trade deal with China in Yuan, US media reports said.
More and more countries draft plans to boost the use of alternative currencies. Nations from China and Russia to India and Brazil increasingly want to trade in non-dollar units — with projects ranging from the use of local currencies to a gold-backed stablecoin and a new BRICS reserve currency.
Now, even Europe appears to be jumping on the anti-dollar bandwagon, with French president Emmanuel Macron recently warning against the continent’s dependence on the greenback, the Business Insider noted.
As the global movement driven by the south toundermine the dollar’s unipolar supremacy gained traction, the greenbacks’ status as a reserve currency eroded last year in 2022 at 10 times the pace seen in the past two decades, according to Eurizon SLJ Asset Management.
US debt hit an all-time high of $33 trillion last week, as the Debt-to-GDP ratio was projected to breach a new record later this decade.
In China, fiscal authorities are cautious of ramping up economic aid via more debt. China’s real estate market is crumbling and a lackluster consumer activity sets in as the economy slows down due to overheating and as burdens from 2008 stimulus continue to weigh.
