BlackRock’s Q3 fixed income outlook note says the world’s biggest asset manager is worried about the rising US government debt.
The bank thinks the growing debt could make investors less interested in long-term US bonds and the US dollar. Instead, investors could look for chances outside of the US.
As US debt rises, de-dollarization may be a good thing.
Fixed income execs at BlackRock say rising government debt could increase de-dollarization risks.
The study says, “We’ve been pointing out for some time now how unstable the US government’s debt is, and we see debt as the single biggest threat to the ‘special status’ of the US in financial markets if nothing is done to fix it.”
The market has changed a lot because of President Trump’s taxes. This event has harmed the US dollar’s role as the world’s primary currency.
The report also discusses the tax and spending plan that Congress is debating. If it passes, the bill will add an extra $5 trillion to the national debt.
The Federal Reserve and foreign banks may not want to buy as much government debt now that there is more of it available.
The report also said:
“With foreign investors stepping back and the government issuing more than half a trillion dollars of debt weekly, the risk of private markets being unable to absorb this debt and consequently pushing government borrowing costs higher is tangible.“
Does BlackRock want to go against the USD?
This is not the first time that the biggest asset manager in the world has said something bad about the dollar. In a message to shareholders, CEO Larry Fink talked about how the USD may not always be the world’s reserve currency. Fink said that besides the dollar, other coins like Bitcoin could be used instead.
The US economy needs to pay attention to BlackRock’s harsh advice. Elon Musk also talked about the growing US debt. Musk said that dealing with the US debt should be essential in a podcast show with Joe Rogan.