The American panic about the national debt could mean a cultural change: are Americans becoming more and more 'European' when it comes to money?

As US citizens emptied their credit cards, took out massive loans and applied for mega-mortgages during the pandemic, the US government did the same with COVID-19 stimulus; the possible consequences of that accumulation were far from important.

But a recent outcry over the national debt suggests that the US could become a little more frugal, and possibly a little more European.

American panic

Major voices in the financial world are emerging in the US Jamie Dimon and Jerome Powell have raised the alarm about excessive public debt.

The US government has gone debt-mad since the start of the COVID-19 pandemic, with Trump's $2.2 trillion COVID stimulus and President Joe Biden's Inflation Reduction Act pushing national debt to record highs.

At the last countthe US had a debt ratio of 121%. The eye-watering figure of $33.1 trillion means that every American owes about $100,000.

With interest rates rising, that unknown high number is starting to scare analysts. 'Black Swan' author Nassim Taleb, who correctly predicted the 2008 financial crisis, fears that debt could become the cause of a more predictable crisis for the US government.

Jamie Dimon said the US needed to address debt levels before foreign owners of US bonds unleashed a “rebellion,” while former Fed Chairman Jerome Powell said it was time for Americans to stage a “rebellion.” “adult conversation” about debt levels.

When did the US, the land of financial abundance and free-flowing credit, fall into a mentality that was more common across the Atlantic?

Debt aversion

Major policymakers and think tanks are worrying about debt in a way that would have seemed hysterical just a few years ago.

Before and in the early days of the COVID-19 pandemic, historically low interest rates effectively allowed governments to take advantage of free money.

In the US, this has combined with historical factors such as a strong dollar, a strong engine of economic growth and continued demand for government bonds, ensuring policymakers that the debt can always be paid off. But things are no longer as rosy as they used to be.

That's because most countries are now dealing with the consequences of massive government spending during the pandemic. The combination of these refunds and rising interest rates to avert generations of high levels of inflation

Earlier in April, the International Monetary Fund (IMF) sent a warning to Britain about its debt profile. with an emphasis on Italy and Italy as two of the four major economies that “must take critical policy action to address fundamental imbalances between expenditures and revenues.”

Meanwhile, the mighty US dollar. The increasing influence of the US dollar has created a real competitor to the dollar BRICS bloc of Brazil, Russia, India, China and South Africa, fueling the possibility of 'dedollarization'.

These pressures are forcing the US to have an uncomfortable conversation about its relationship with debt.

A cultural shift

However, it could also mark an unlikely cultural shift in the way Americans experience debt burdens. These shifts are making the US more and more like Europeans.

American citizens tend to be more comfortable with debt, at least privately. In 2021, more than two-thirds of the population will live in the country had a credit card compared to, for example, about 38% of people in France.

But since the start of the financial crisis, trends have been reversing.

In the US, private debt as a share of GDP has fallen from 99% in 2007 to 74% in 2022, according to data from the International Monetary Fund (IMF).

French private debt has risen from around 46% to 68% in the same time frame.

Several European governments have historically been more aggressive about their levels of personal and public debt.

Germany, for example, has one constitutional budget rule that limits deficits to 0.35% of GDP per year, although this could be expanded during economic downturns. In the past, this rule has been sufficient to stop projects. Eurozone countries also adhere to stricter debt rules.

Citizens across the continent are also becoming more careful with their personal finances.

“It is not only about the national debt, but also about private debt. They don't like being in debt,” Zareh Asatryan, director of the Leibniz Center for European Economic Research (ZEW), the research unit for corporate tax and public finance, said of the Germans.

“For example, if you look at mortgage take-up, only half of Germans own apartments. They don't like taking out mortgages and buying apartments.”

A 2015 Pew survey found that there was also a generational shift in the way Americans viewed debt. The survey found that 70% of baby boomers view loans and credit cards as opportunity-enhancing, while 60% of millennials think the same.

“They experienced the Great Recession acutely: Millennials came of age during that period and saw high levels of debt take a toll on households' immediate financial security and prevent them from saving enough for later, and Gen Affairs. consequences of the recession at a higher rate than many other Americans,” researchers wrote at the time.

French exit

According to ZEW's Asatryan, there is one crucial area where the US continues to diverge from Europe, meaning the debt battle is not as urgent: economic growth.

The US economy is expected to grow 2.7% this year, according to the IMF.

However, it does not appear that this has been enough to eliminate the debt. The country's budget deficit has risen to 5.7% of GDP in 2023, a shift that could be the main cause of the recent uproar among analysts. Earlier in April, the IMF called on the US to urgently address this deficit.

It is also ahead of the figure in France, where panic over the country's debt situation is increasing.

France has attracted attention in recent months as the country's deficit rose to 5.5% in 2023, while economic growth hovered at a paltry 0.8%.

Economists at ING said a renewed focus on France's troubling debt situation marked the culmination of a “spectacular turn of events”, all of which was bad news for the country.

Global rating agencies Moody's and Fitch were both expected to publish updated guidance for French government debt on Friday.

“Ultimately, 2023 was synonymous with a clear deterioration in public finances. The official figures have not all been published yet, but France will be among the countries with the worst budgetary situation in the EU,” writes ING.

The latter had already downgraded France to AA- last November, citing the country's rating high national debt as a special weakness.

A new panic about U.S. debt could be the culmination of a longer shift in the way Americans approach debt, both at the micro and macro levels.

The current situation in France, where investors are thinking twice about pouring their money into the country, could give the country good reasons to heighten those fears.

This story originally ran Fortune.com

Related Posts

  • Finance
  • May 15, 2024
  • 12 views
  • 3 minutes Read
Here are the top ten picks for the Mormon church's $55 billion stock portfolio

Getty Images The investment arm of the Mormon church disclosed some of its assets in a 13F filing on Wednesday. The church has built a portfolio of individual stocks worth…

  • Finance
  • May 15, 2024
  • 14 views
  • 4 minutes Read
Florida lawmakers are proposing to change the tax code to provide premium relief for homeowners

Florida lawmakers are proposing to change the tax code to provide premium relief for homeowners Florida Congressman Byron Donalds is working with his colleague Senator Rick Scott on a bill…

Leave a Reply

Your email address will not be published. Required fields are marked *

You Missed

South Africa's four major political parties are entering the final weekend of their pre-election campaign

  • May 25, 2024
South Africa's four major political parties are entering the final weekend of their pre-election campaign

Michigan travel guide: Discover the state's top tourist stops

  • May 25, 2024
Michigan travel guide: Discover the state's top tourist stops

The “absolute worst” times for car buying are over

  • May 25, 2024
The “absolute worst” times for car buying are over

With Not My Job guest J. Kenji López-Alt: NPR

  • May 25, 2024
With Not My Job guest J. Kenji López-Alt: NPR

Oops!… I Did it Again – Singer Brittney Spears posts nude video on the beach: “Hello to My Ass!!!” | The Gateway expert

  • May 25, 2024
Oops!… I Did it Again – Singer Brittney Spears posts nude video on the beach: “Hello to My Ass!!!”  |  The Gateway expert

Donald Trump is targeting Senator Tom Cotton as his 2024 running mate

  • May 25, 2024
Donald Trump is targeting Senator Tom Cotton as his 2024 running mate

Trump could be hammered for the conviction for violating the secrecy code

  • May 25, 2024
Trump could be hammered for the conviction for violating the secrecy code

Record broken for most passengers screened at US airports, TSA says

  • May 25, 2024
Record broken for most passengers screened at US airports, TSA says

Andy Cohen asks judge to dismiss lawsuit against Leah McSweeney

  • May 25, 2024
Andy Cohen asks judge to dismiss lawsuit against Leah McSweeney

Jack Smith asks judge to limit Trump's statements after 'inflammatory' statements about FBI raid

  • May 25, 2024
Jack Smith asks judge to limit Trump's statements after 'inflammatory' statements about FBI raid

Trump Column Ban Requested by Special Counsel in Secret Documents Case

  • May 25, 2024
Trump Column Ban Requested by Special Counsel in Secret Documents Case