Jim Millstein is the co-chair of Guggenheim Securities and he has warned the United States Government to put its finances in order or face a financial disaster.
Millstein, in a recent interview with Bloomberg says the government’s spending far exceeds its revenues. This creates an unsustainable situation.
We’re currently running a deficit of 7% GDP this year. This means the debt will increase by 7% per year. The economy is only growing at around 2%-3% per year. We are becoming increasingly indebted because our economy’s growth isn’t keeping up with the increase of debt. There’s an urgent need to achieve what is called fiscal consolidation in trade. “We need to put our house in order, and bring revenues close to expenditure.”
Millstein said in a Bloomberg interview that investors are concerned about the US fiscal situation, and this is one of the reasons why yields on long-term Treasury bonds have been increasing recently.
Millstein said that the 10-year Treasury yields were increasing because of “the imbalance of federal finances, and the large amount of debt they must finance.” Millstein also stated there would be “a massive supply of Treasuries” coming onto the market.
Millstein believes that the US is facing its biggest financial problem at this time, due to the increasing interest rates on existing debt and future loans.
Millstein believes the US could be in a situation similar to that of the 1990s, when the bond yields were high enough to encourage politicians to act to reduce the deficit.
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