Yardeni Research predicts debt crisis in US

The US credit rating downgrade from AAA to AA1 by Moody's last week continues to weigh on markets. Investor fears about the country's soaring national debt amid Donald Trump's policies have reinforced. Yardeni Research experts are now questioning whether the United States can avoid the debt crisis and what the consequences would be if the worst-case scenario materializes.

The company considers such a scenario quite possible. The American president's extension of tax breaks would significantly increase the country's debt burden. The Congressional Budget Office estimates that Trump's bill could cost $2.3 trillion over the next 10 years, with several experts warning that this figure may even reach $5.7 trillion. Despite these risks, Yardeni Research does not view a potential debt crisis as catastrophic for the American economy.

The US government retains leverage to influence the situation. For instance, the Treasury could implement yield curve control, while the Federal Reserve might resume monetary policy easing if necessary, Yardeni Research notes.