‘Day of reckoning’: Moody’s economist Mark Zandi warns that conditions for economic crisis are falling in place for US Moody’s Analytics Chief Economist Mark Zandi is increasingly unnerved about the potential for the U.S. to sleepwalk its way into an economic crisis. “I can’t…
ll you when that day of reckoning might happen,” Zandi told hosts Sonia Jahshan and Simon Baggs on a recent episode of the Sonia and Simon podcast. “All I can tell you is all the preconditions for that are coming into place and I don’t think that’s appreciated.” Must Read Zandi said he thought it was unavoidable that the U.S. could address its deteriorating finances without an external shock to force it. Over the past month, a sell-off in bond markets has pushed yields on the critical 30-year treasury bond sharply upwards, pushing the Treasury Department to buy back more of its bonds, starting early September, in an effort to artificially suppress interest rates. “I think it’s almost inevitable that we’re going to see an event like this because I don’t think the American political system and people can make the changes that are necessary to address our long-term fiscal problems without being pushed by something like a crisis generated by higher interest rates,” Zandi said on the podcast. ‘We got a problem’ Zandi argued that he has never seen unnerving circumstances converge like this all at once. “Never in the 35 years has there ever been a time when all of the measures are screaming, you know, we got a problem,” he said
The Moody’s economist first pointed to America’s debt-to-GDP ratio, which crossed the 100% threshold at the end of April. That gauge is typically used to demonstrate the amount of the debt held by the U.S. government against the size of the U.S. economy. It also provides insight into the federal government’s ability to repay it over time.
The U.S. hasn’t reached triple-digit territory in debt-to-GDP ratio since the aftermath of World War II, when it once stood at 106%. “If…