U.S. Debt Risk Could Raise The Likelihood Of Financial Crisis
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When the Federal Reserve stepped in to save the day after the 2008 financial crisis, it cushioned the blow of the Great Recession by artificially lowering interest rates, making debt everyone’s new friend. Debt was used as a tool by the Federal Reserve to push the economy forward. With the U.S. debt now reaching a seemingly unsustainable level, it appears we are reaching a tipping point.
The Escalating Burden of Household and Global Debt Risk Amid Financial Crises
The prolonged offering of practically free debt has loaded up not only corporate ledgers but household accounts as well. Global debt continues to push the envelope of what’s possible and U.S. household debt has now hit $17.29 Trillion as of Q3 2023, according to Federal Reserve Bank of New York.
As interest rates hold at higher levels, downward pressure will persist throughout global markets.
The Role of Precious Metals in Economic Uncertainty
In times of geo-economic uncertainty and downward global market trends, precious metals are viewed as a hedge against market uncertainty and can offset the risk in debt instruments. Precious metals should be viewed as the concrete foundation to your financial future. However, many investors mistakenly view precious metals as an investment option instead of a key ingredient to a properly diversified portfolio.
As per Statista Research Department, “U.S. monthly projected recession probability 2020-2024. The likelihood of the United States entering an economic recession has risen to 62.94%, up from last month’s projection of 51.84%. This prediction is based on a one-year advance assessment using the variance between 10-year and 3-month treasury rates”.
According to the Council on Foreign Relations, ”the U.S. national debt has soared to historic levels relative to the size of the U.S. economy” and “many economists say that the rapidly mounting debt load could soon diminish U.S. economic growth, restrict government spending on important programs, and raise the likelihood of financial crises.”, as of Q3 2023.
This is why China and Russia have been accumulating precious metals at a feverish pace, and the Brick nations have taken steps to move away from the debt involved with the U.S. dollar.
Questions after reading the article? Look into our FAQs for answers. For any outstanding or urgent queries, contact Precious Metals experts.
How to Calculate the Debt Risk Premium?
Calculate Debt Risk Premium as the gap between the debt interest rate and the risk-free rate, demonstrating the additional return for taking on investment risks.
What is a Global Financial Crisis?
A Global Financial Crisis is when the entire world faces big problems with money – like stock markets crashing, banks failing, and everyone’s money becoming less valuable.
Causes of the Global Financial Crisis
The 2008 Global Financial Crisis happened because banks made risky home loans, people couldn’t pay, and it spread worldwide because banks and markets were too connected, and there weren’t enough rules to stop risky behavior.
How does the US Debt work?
The U.S. debt works by the government borrowing money through the sale of Treasury securities, like bonds and bills, to investors and other countries. These debts are repaid with interest over time, and the total debt represents the accumulated amount the U.S. government owes.
Precious metals are a major financial asset used by central banks as a hedge against debt and used by governments as a tool to maintain economic health. Like to know how you can protect your financial future? Contact Orion Metal Exchange to discuss the benefits of owning precious metals and see how you can protect your purchasing power today. Call 1-800-559-0088, for a FREE investor kit.
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