The US debt is rising dangerously. And the Fed is to blame, says Soros’ man

The total amount of US debt is roughly 573 times greater than the annual performance of the Czech economy, warns long-time investment strategist George Soros. At the same time, the banking crisis in the USA is said to be just beginning, economist Lukáš Kovanda comments on the growing indebtedness of the United States and the banking crisis there.

The total amount of the US debt is roughly 200 trillion dollars, converted to approximately 4,300 trillion crowns, warns Stanley Druckenmiller, a long-time investment strategist of billionaire George Soros. He is quoted by Bloomberg. For comparison, this year’s full-year GDP of the Czech Republic will be approximately 7.5 trillion crowns. The US debt therefore exceeds this value by approximately 573 times.

Shock for Americans. The economy slowed down in the quarter, as no one expected


United States gross domestic product (GDP) rose 1.1 percent in the first quarter on a year-over-year basis. That’s an unexpectedly sharp slowdown from 2.6 percent in the fourth quarter, the U.S. Commerce Department said in its flash estimate. Analysts had expected the world’s largest economy to slow growth to just two percent.

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America’s dangerously rising debt

Druckenmiller takes into account not only the existing debt itself, but also the present value of all payments that will have to be made by law. By 2040, for example, all taxes collected in the US at the national level will go to retirement pensions.

According to Druckenmiller for the dangerously rising American debt can also be blamed on the country’s central bank, which for many years pursued an extremely expansionary monetary policy, colloquially “printing hundreds of billions of dollars”. For them, it bought the debt of the US government, which it still holds in large volumes, so it creates a false illusion, as Druckenmiller says, that it can help the US government with the problem of extreme public debt.

The US is unlikely to avoid the crisis

Lukáš Kovanda: The crisis in the USA is almost inevitable. It will also affect the Czech Republic


In the US, loans are falling the most in history. This increases the risk of a recession in the USA, which would adversely affect the Czech Republic as well.

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The US central bank actually encouraged individual US governments to behave fiscally irresponsibly with its “printing of hundreds of billions”. So some form of “reset” now seems inevitable. With unfathomable consequences for the global economy.

David Havrlant: Medium, Better, Bank Kaliyuga


The recent collapse of regional banks in the US foreshadows the peak of the tightening of monetary conditions, although it is very unlikely to turn into a cataclysmic shock that would send the US and most likely the world economy to the bottom. The upcoming tightening of credit conditions in the basic scenario of the macroeconomic outlook will nevertheless contribute to a temporary weakening of domestic consumption and thus accelerate the onset of demand-side disinflation. This will enable the gradual normalization of monetary policy leading to acceleration of economic growth to trend values ​​in the course of the next year.

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Too agile Fed

Druckenmiller doesn’t see much sign of the situation improving. On the contrary, when the banking sector in the US was shaken in March and Silicon Valley Bank collapsed, the US central bank immediately rushed to the rescue and reversed even the little progress it had made until then by at least somewhat reducing its giant balance sheet. It is the swelling balance sheet of the American central bank that reflects its extremely expansionary monetary policy in recent years. And thus also increasing public indebtedness.

According to Druckenmiller, such an “asymmetric response” of the American central bank to developments in the local economy is the fundamental reason why lawmakers in Washington have not yet decisively addressed the growing public debt. The asymmetry lies in the fact that the central bank reacts very agilely even to relatively small shocks, such as the one mentioned in March, by providing new liquidity or by pumping in new support money.

The Fed is about to raise rates.  It will be the last time until the next bubble.  (Pictured is Jerome Powell, chairman of the US Federal Reserve, or Fed.)

The Fed is about to raise rates. It will be the last time until the next bubble


The American central bank will announce the new values ​​of the basic interest rates on Wednesday. Rates are expected to rise, with near-unanimity calling for an increase of 25 basis points. At the same time, almost everyone agrees that this will be the last rate hike in the current cycle. Reason? Fear of financial stability.

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Druckenmiller would not be pleased with the current words of Robert Kaplan, a former member of the management of the US central bank. According to him, the banking crisis in the US is still at its beginning, which is why the US central bank should now refrain from further raising its base interest rate. At the same time, further increases in basic interest rates would be compatible with the reduction of the volume of its balance sheet, and thus with the pressure to reduce the growth rate of public borrowing.

Read more comments by economist Lukáš Kovanda here

Jamie Dimon, head of JPMorgan Chase

The banking crisis in the US is not over yet, says an influential American banker


The banking crisis in the United States continues and its consequences will be felt for years to come. In his annual report to shareholders, the head of the largest American bank JPMorgan Chase in Co Jamie Dimon stated this. He emphasized, however, that the current crisis is not comparable to the global financial crisis of 2008.

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All about inflation

Inflation scarecrow. What causes it? How to defend against her? How to invest, where to save savings, where there are decent interest rates, which bonds are worth it? How do the state, the government and the CNB fight inflation? Who and why increases the price and how much? How to cope with price increases? Is it the right time to get a mortgage, will interest rates rise or fall, and for what reason? Context, tips, hints, warnings.

High inflation troubles not only the Czech Republic, but also other European countries and the United States. See the overview in the world.

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