Experts say the US economy is on an “unsustainable path” and warned that American consumers are “on the verge of hitting a wall” over soaring debt.
Heritage Foundation economist E. J. Antoni warned that many factors in the Biden administration’s management of the U.S. economy are “unsustainable” as the president continues to print and spend.
US growth figures were released on Friday, with GDP increasing by 4.9% in the third quarter, much to the delight of many.
Additionally, consumer spending is reported to have accelerated, with inventory accumulation increasing at a pace of $80.6bn (£66.5bn) last quarter, contributing 1.32 percentage points to GDP growth.
Watch here: EJ Antoni shares his thoughts on US economic growth
But Antoni warned that the numbers could be deceptive.
“Although this number has received a lot of positive attention and some so-called experts have even cited it as an explosive number, the fact is that growth is incredibly unsustainable. “It represents,” Antoni told GB News.
“Increasing corporate inventory is a good example.
“Businesses are increasingly fearful of a return to inflation and are buying something today to avoid buying at a higher price in the future. So, mathematically, an increase in inventories, Therefore, an increase in GDP today will result in a decrease in inventories tomorrow and therefore a drag on future GDP.
U.S. updates:
Heritage Foundation economist E. J. Antoni warned that many factors in the Biden administration’s management of the US economy are “unsustainable” as the president continues to print and spend.
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Mr Antoni said he believed credit card debt, which has recently soared to more than $1tn (about £820bn), will soon “hit a wall”.
Reuters
“Unfortunately, we already have a lot of consumer debt,” Antoni said.
“In fact, this is one of the key ways consumers continue to increase their spending. They are depleting their savings and starting to take on debt.
“Credit card interest rates are currently at record highs, and for the first time in American history, we have more than $1 trillion in credit card debt.
“Consumers are therefore very close to a wall where they will no longer be able to access additional credit or draw down their savings any further.
“At that point, you have to stop increasing spending because there’s nowhere else to get money.”
He added: “The scale of the debt, and perhaps more importantly, the inability of the American economy to support it, is incredibly worrying.”
“We can’t afford that. It’s an unsustainable path again.
“So what is happening now is that the government continues to overspend, which means that interest rates are high and are likely to rise further, while at the same time budget deficits continue to increase and therefore debt also increases. This means that it continues to increase.
“This is not only because we are issuing new debt at high interest rates, making that debt costly to repay, but also because old debt is currently rolling over from 1-2% to 5% plus. It means there is.
“We’re more than doubling our financing costs there, our existing debt. And over the next year, between the old debt and the new debt that’s currently being issued at 5% plus interest, That would leave us with $10 trillion (£8.25 trillion) in debt.
“Debt servicing costs are going to absolutely explode. This is on top of the increases we’ve already seen over the last year.”
