Economic Consequences of Rising U.S. Government Debt
There has been a rapid increase in the amount of federal government debt over the years and this has sounded an alarm to the public and the policy makers. The United States federal government has seemingly unblocked the country from accessing at low-interest rates. From the past historical statistics, the United States Treasury gains have always been lower as compared to the growth rate of the U.S. This paper aims at examining the ramification of debt financing at the low-interest rates. With the short maturity period of the United States public debt, a minimum of 2.5 trillion dollars in a year, the investor expectations should be given a high consideration. The excessive debts that the U.S have justifies some reasonable doubts concerning monetary stability and solvency and hence undermining the financing strategy under the perception that the United States is safe from its debts.
The United States citizens and the policy makers are concerned with the rapidly growth of the debts incurred by the federal government. The ratio between the public debt and the GDP has been on the rise from 36.2% in 2007 to 62.2% by the end of 2010. Analysts predict that under the current policies, the debt to GDP ratio is expected to increase further to more than 80% by 2021 (Aizenman & Marion, 2009). These statistics make one to wonder if there are consequences of this…
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