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December 2 2021 4:46 AM ˚
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The dollar and the US debt

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According to available data, the US federal debt held by the public, mostly in securities, was $20.83 trillion on August 30, 2020. This is equal, according to the same sources, to 99.3 percent of the US’ 2020 GDP.اضافة اعلان

It is estimated that 37.1 percent of the US’s federal debt is owned by foreigners, who held in June 2020 about $7 trillion.

The budget deficit of the fiscal year 2020-2021 ending on August 31, 2021 was $2.80 trillion. This would mean that that amount would be borrowed to cover this deficit. Therefore it is not off-target to assume that the current federal debt of the US stands at $23.63 trillion or 100.017 percent of GDP in 2021.

When the 2008 financial crisis took place, the average annual budget deficit of the US reached $1.4 trillion. In 2021, the budget annual deficit doubled. That is the reason why the debt-to-GDP ratio has clearly exceeded the 100 percent threshold.

On the other hand, money supply gives a warning picture. As we all know, economists now deal with four money supply definitions. The first is currency in circulation (M0) which includes federal reserve notes, coins, and currency no longer issued. The value of this narrow definition was $ 2.1 trillion on March 31, 2021.

Yet, M1, which includes currency in circulation and demand deposits, added up to $40 trillion.

Broad money, M2, which includes M1 plus small time deposits less than $100,000 and shares in retail money market mutual funds, totaled $90.4 trillion in March.

The broadest definition of money is M3, which includes all M2 plus large time deposits, institutional money market funds, short-term repurchase agreements, and larger liquid funds. M3 defined as such totaled $1.30 quadrillion at the end of March this year.

In comparison to these figures, the money exchanged in the US stock exchange was $95 trillion in 2021, while cryptocurrency reached the value of $2 trillion.

Thus, some economists are warning that the US dollar is not going to disappear very soon. It is assumed that the per capita US dollars cash holdings is about $3,000. Despite the wide use of credit cards and all other electric payment devices, cash is still widely used in the leading world economy.

However, we should look at the distribution of assets in the world. According to Forbes, there are 2,755 billionaires whose total wealth in 2021 was estimated at $13.1 trillion. The richest 26 billionaires, however, own assets equal to what the poorest 3.8 billion people — 50 percent of the global population — own.

The mammoth size of outstanding US federal debt ($23.6 trillion dollars), the sheer size of M3 of ($1.3 quadrillion), and the concentration of wealth should flash red warning signs that the world’s monetary stability is at risk.

The domestic debt of US private citizens together equals roughly the size of US GDP in 2021. US families and private individuals owe about $8 trillion for housing, $1.7 trillion for student loans, $2 trillion for credit cards, and $12 trillion in business debts. Thus, domestic debt is about equal to GDP in 2021.

Therefore the US total public, private, and foreign debt exposure would in gross exceed $45 trillion. Any drastic disruption in those debts or in any major subcomponent would upset the global monetary apple cart.
The need for concerted action is necessary. Discretionary powers and autonomous monetary decisions are rapidly bringing the world to the brink of a volcanic eruption.

Jawad Anani is an economist and has held several ministerial posts, including former deputy prime minister and former chief of the Royal Court.

Read more Opinion and Analysis