🦢 Where is the next black swan?
Nassim Taleb's book "The Black Swan" has made such an impression on economists and financiers that now everyone is trying to predict the next trigger of the crisis.
➡️ In our country, for example, apocalyptic scenarios have been coming out for many months now - the inevitable devaluation of the ruble, the collapse of the real estate market, freezing of deposits, etc. However, time passes, and there are no prerequisites for all this.
➡️ As for the US, Jamie Dimon, CEO of JPMorgan Chase, recently said that while inflation appears to have peaked, he does not rule out the possibility that the country will slide into stagflation. More precisely, a slowdown in economic growth amid high inflation. Incidentally, Ray Dalio also warned about this last year.
But why?
One of the reasons, according to Dimon, is the budget deficit. Over 11 months, it grew by 24.4% and amounted to $1.897 trillion.
That's partly because debt servicing costs have totaled $1.05 trillion since last October, up 30% from 2023. Things aren't likely to get any better.
Should we panic? At first glance, with $35 trillion in debt compared to $142 trillion in American wealth, things don't seem so bad. But that's not entirely true.
Saying that nothing will happen if the debt continues to grow is like telling a patient with high blood pressure to eat more salt because he hasn't had a stroke yet.
In the long term, this could lead to a decline in confidence in the dollar, which would create serious problems for the US, as investments in its treasury bonds would decrease. I wrote about this in more detail here.
What do we have as a result?
◽️I'm not sure about the black swan of stagflation. Much will depend on how the budget deficit is compensated - through borrowing or tax increases.
If the former, then this would effectively be equivalent to increasing the money supply (or, more simply, printing money), which could create an excess of money in the economy and lead to higher prices.
◽️As for the US government debt problem, as long as the US economy remains the world's number one economy, demand for Treasury bonds will continue, even though the bubble is inflating.
But this can't go on forever.