A recent analysis warns that the world is heading toward an unprecedented financial crisis, exacerbated by a state of American politics characterized by inconsistency and chaos. According to Eduardo Porter, economic analyst, the government's response to such an eventuality would be not only disorienting but also counterproductive for global stability.
Structural Vulnerability and Federal Debt
Although the U.S. has avoided a major banking crisis since the 2007 real estate collapse, current financial markets are fragile. The main risk lies in the accumulation of federal government debt, which already exceeds 120% of gross domestic product (GDP). With massive budget deficits projected for the next decade, this financial burden continues to grow at an accelerated rate.
Porter notes that financial bubbles, such as those driven by current enthusiasm in artificial intelligence, could burst suddenly. Additionally, the dynamic between the U.S., which needs foreign capital to finance its deficits, and China, which exports that capital by recycling its trade surplus, creates an unstable equilibrium. The ideal solution would require mutual spending adjustments, but political realities in Washington and Beijing make this unlikely.
The Political Factor: Trump and Global Distrust
Political uncertainty under Donald Trump's second term adds a critical layer of risk. The article argues that the president's idiosyncratic decisions, such as abrupt tariffs or military threats against Iran or Cuba, could provoke panic among investors. Unlike 15 years ago, when real interest rates were near zero and demand for Treasury bonds was stable, today investors demand high yields and diversification.
"The political fundamentals are really bad," said Maurice Obstfeld, former chief economist of the International Monetary Fund (IMF). "If you try to simulate it, the Federal Reserve has no good options."
Lack of International Cooperation
While the U.S. faces its own political instability, other global actors are also struggling with their own internal problems. France is going through a budget crisis and elections that could bring to power a right-wing populist wing similar to American MAGA. On the other hand, China remains firm in its strategy of subsidizing manufacturing for export, showing little interest in correcting global financial imbalances.
The conclusion is clear: facing an imminent crisis, international cooperation will be minimal due to political animosities. The lack of a coherent fiscal plan and reliance on magical solutions, such as artificial intelligence generating massive tax revenues without concrete evidence, leave the world exposed to the worst possible scenarios.
