The expert predicted a weakening of the dollar due to the growth of the US national debt

Rising U.S. government debt could increase risks to the global financial system and weaken the dollar if investor confidence in the United States' obligations declines. Evgeny Shatov, partner of Capital Lab, told Izvestia about this on February 26.

According to Shatov, the US national debt plays a key role in the global financial system, and its growth increases risks to the stability of the global economy. U.S. Treasury bonds (treasuries), which are considered "risk-free" assets, serve as a benchmark for other financial instruments. Changes in the cost of servicing American debt may affect interest rates around the world, the expert added.

In addition, a decrease in investor confidence in the ability of the United States to service its debt could weaken the dollar, Shatov said. This will lead to losses for countries holding reserves in the US currency, which will affect their economic stability.

"Countries holding reserves in the US currency will face losses, which will affect their economic stability. In addition, growing concerns about the sustainability of the US government debt are already leading central banks in some countries to reduce the share of treasuries in their reserves and increase investments in gold," he said.

According to Shatov, the likelihood of a significant decline in the value of the dollar and large-scale financial turmoil depends on several factors, the main of which is investor confidence. While U.S. Treasury bonds are considered safe assets, the dollar continues to maintain its status as the world's reserve currency. However, the growing public debt and budget deficit can undermine this trust, concluded Shatov.

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What should the United States do with its growing obligations and what does this threaten its economy?

On February 25, the International Monetary Fund (IMF) announced that the US national debt will reach 140% of GDP by 2031. It was noted that the upward trajectory of the ratio of government debt to GDP and the growing ratio of short-term debt threaten both the economic stability of the United States and the global economy as a whole.

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