Goldman Sachs Exchanges Is a US fiscal crisis ahead?
39 snips
Jun 18, 2025 
Niall Ferguson, a historian at Stanford's Hoover Institution, and Ken Rogoff, an economist from Harvard, dissect the looming concerns about U.S. fiscal sustainability. They delve into how rising real interest rates coupled with substantial debt levels could trigger a crisis, and discuss historical parallels to strategic fiscal leadership. The duo also tackles the potential challenges facing the U.S. dollar's dominance due to shifting geopolitical landscapes, while emphasizing the role of voter engagement and technology in navigating these fiscal challenges.
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Rising Interest Rates Undermine Debt
- Long-term real interest rates are rising and have normalized, ending the era of "low forever" rates.
- This rise affects debt sustainability globally, especially for countries with growing debt like the US.
Interest Payments Threaten US Power
- The US spends more on interest payments than on defense, threatening its military power and global dominance.
- By 2040, interest costs may double the defense budget if current fiscal trends continue.
Dollar Dominance is Eroding
- Dollar dominance provides some cushion for US debt but is eroding due to geopolitical shifts and alternatives like the euro and renminbi.
- Rising debt and inflation risk will further weaken confidence in the dollar.