Tesla's CEO Elon Musk on October 29, 2024, raised concerns about a "financial emergency" in the U.S., as government interest payments have now exceeded USD 1 trillion a year, surpassing the entire budget for the Defense Department.
Elon Musk cautions about the alarming rise in US debt and interest payments, amidst investors tilting toward Bitcoin and gold for safety
Tesla's CEO Elon Musk on October 29, 2024, raised concerns about a "financial emergency" in the U.S., as government interest payments have now exceeded USD 1 trillion a year, surpassing the entire budget for the Defense Department.
Speaking at a recent rally for Donald Trump, Musk pointed out that these interest payments make up 23 per cent of all federal tax revenue and that the national debt has reached USD 35.7 trillion. Times of India said investor Paul Tudor Jones has renewed his warnings about a looming "debt bomb", resulting from what he terms "fiscal recklessness."
Bank of America analysts warn the U.S. debt could reach USD 36 trillion by year-end. Without raising the debt ceiling, a default may trigger financial chaos, diminishing confidence in U.S. Treasuries and possibly resulting in a credit rating downgrade and increased borrowing costs. This could lead to an immediate recession, job losses, and diminished global confidence in the U.S. dollar as its status as the world's reserve currency is contingent on confidence in U.S. fiscal stability. Further, this could trigger volatility in global markets.
Why Surge In US Debt?
The surge in debt is mainly due to stimulus measures during the COVID-19 pandemic, which contributed to inflation and led the Federal Reserve to raise interest rates significantly. Looking ahead, experts feel the debt will continue to rise, potentially adding another USD 500 to USD 600 billion each year.
This growing debt crisis has prompted investors to turn to alternative assets, helping both Bitcoin and gold to approach record highs. Bitcoin is nearing its all-time high of $70,000 as more people see it as a safe investment against inflation. Meanwhile, Musk's Tesla itself holds about 10,000 Bitcoins worth USD 800 million, and the company has recently moved its Bitcoin holdings to new wallets, sparking speculation about potential sales.