If changes are not made and the US government debt is not reduced, then in about 20 years it will reach an unaffordable level, which may lead to default. This forecast was made by Penn Wharton analysts. An implicit default, which implies the monetization of debt, can greatly increase inflation. At the moment, the US national debt is $26.3 trillion, not including debt to the federal government. The total outstanding debt is $33 trillion. According to the report, while maintaining the current policy, the country has about 20 years to make adjustments and take measures. After that, neither explicit spending cuts nor tax increases will be able to prevent default. The difference between this default and technical ones is that it will have much more serious consequences and will have an impact on the global economy for both the United States and the rest of the world. Today, the level of American public debt is about 98%, while it is believed that it should not exceed 200% of GDP in order to avoid the worst-case scenario. As a result, government bond yields will rise to attract investors. This year, long-term bond yields have already exceeded 5% due to a lack of interest in Treasury bonds, which caused a collapse in the bond market and became one of the largest collapses in history. As debt increases, the cost of loans will also increase, and eventually interest rates will reach such high levels that they will cause a general economic crisis.
