US public and corporate debt levels have skyrocketed due to the coronavirus pandemic this year. Debt has reached record highs, according to The Washington Post.
According to forecasts, the federal budget deficit will grow by $4 trillion, making the national debt greater than the entire GDP of the nation. The last time this happened was in the mid 1940’s.
A number of large corporations, such as ExxonMobil and Walgreens, have already used up all of the credit available to them.
Now businesses are faced with a choice: either dismiss employees, or stop fulfilling their loan obligations. Banks, for their part, demanded that customers repay student loans and “close” credit cards.
According to a professor of economics at Princeton University Atif Mian, American debt can reach a level that has never been matched in modern history.
We are definitely approaching the point of no return.Atif Milan Professor of Economics at Princeton University
In order to somehow support the economy in the context of the spread of coronavirus, the US Federal Reserve lowered its key rate to zero. In addition, the US Federal Reserve added $2 trillion to its portfolio. A similar amount (adjusted for inflation) was added four years after the Great Depression.
The country’s finance minister, Stephen Mnuchin, believes that the deficit will be eliminated in the future, and now it is necessary to provide support to businesses suffering from the epidemic.
According to estimates of the International Monetary Fund, US GDP will fall by the end of the year by 5.9 percent. In the global economy, the IMF predicts, a decline of 3 percent will be recorded.