The Economics Studies program of the Brookings Institution has published a study on how mounting US federal debt, now at $36 trillion, could spark a devastating financial crisis in the US and globally.
While it concluded that the chances of such a crisis are low, the fact that such an analysis has been carried out by a major US think tank indicates this issue is causing greater concern. As the report acknowledged, “That the US is on an unsustainable fiscal trajectory is well-established and has long been evident in debt projections.”
Their paper, they wrote, sought to “examine the various channels through which debt can affect the economy to assess the risk that elevated debt will lead to a crisis.”
They defined a fiscal crisis as a “sudden, large and persistent downturn in demand for Treasury securities relative to supply that triggers a sharp and persistent spike in…
