The rising level of US public debt, heading towards $40 trillion thanks to the summer's "big beautiful bill," poses the risk of a significant reckoning for the economy if the pace of growth does not accelerate. A common-sense observation, surely, but one that gains greater weight when expressed by the Chief Executive Officer of Goldman Sachs. "If we continue on the current trajectory and don't raise the level of growth, there will be a bill," David Solomon warned during a speech at the Economic Club of Washington. He thus echoed the widespread concern that the US and other Western economies have started to rely on debt-fueled growth. US national debt recently reached $38 trillion. "We should be concerned about it, without sounding alarm bells," he noted. "But I do think over time, this is an issue." "The pandemic played an accelerating role, and we don't seem to have the ability to contain it. So, over the last 15-plus years, and since the financial crisis, we've gone from $7 trillion to $38 trillion in debt."
The US economy remains strong - The dollar still dominates
The US economy is in relatively good shape, reducing the chances of a recession in the immediate future, Solomon estimated, however.
Yet, he points out that for debt-laden economies, there is only one real way out: "The path to an exit is a path of growth." Despite concerns that the dollar's role may weaken, he does not believe it will lose its position as the global reserve currency. "When you look at capital flows globally, 50% of international investor capital flows into the US," he stated. "Maybe they're hedging the dollar risk a little bit differently than they have in the last couple of years, but that's a marginal thing. We need to watch it. However, I'm not worried that there's some fundamental change going on."
Recently, Goldman Sachs CEO, David Solomon, downplayed concerns about potential systemic risk in credit markets following the collapse of two US companies. Speaking in an interview with Bloomberg TV on the sidelines of the Future Investment Initiative in Riyadh, Solomon appeared reassuring against the fears that emerged after the failures of First Brands Group and Tricolor Holdings. "I don't see anything, outside of individual instances of bad credit, that leads me to conclude that we have a systemic issue in front of us," Solomon stated. With these words, the head of Goldman Sachs sought to put an end to rumors that the recent corporate failures could trigger a new wave of turmoil in the American debt market. It is noted that this month, Goldman Sachs exceeded Wall Street estimates for third-quarter earnings, as investment bankers benefited from a rebound in deals and acquisitions.
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