'Bond King' Bill Gross Warns US $34 Trillion Debt Deficit To Fuel Inflation 'Like Global Warming' Over Next Decade: 'Significant Problem'

Bill Gross, co-founder of PIMCO, also known as “Bond King” anticipated a significant escalation in the U.S. debt crisis. He compared the future implications of the nation’s $34 trillion debt to the slow yet destructive effects of climate change, predicting a potential spike in inflation.

What Happened: Gross expressed concerns over the compounding impact of annual deficits nearing $1.5 trillion. He warned of the growing disparity in rates and the mounting short-term debt, reported Business Insider on Thursday.

“Two to five to 10 years down the road, with these types of deficits and the compounding type of effect of a trillion and a half dollar deficit each year, then, you know, that’s a significant problem,” the PIMCO co-founder said. “It will come much like global warming.”

As the U.S. continues to overspend, markets view the Federal Reserve as the potential financier for these deficits. However, Gross cautioned that such a course could trigger further inflation. Several Wall Street experts have voiced similar concerns, suggesting that future inflation might lead to increased interest rates and debt and impeded growth.

“Two to five to 10 years down the road, with these types of deficits and the compounding type of effect of a trillion and a half dollar deficit each year, then, you know, that’s a significant problem,” the PIMCO co-founder said. “It will come much like global warming.”

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Unless overspending is curbed through legislative measures, the U.S. risks defaulting on its debt, potentially within the next two decades, a development that could have profound global economic implications.

Why It Matters: In December, the U.S. witnessed a massive spike in its national debt, with an increase of a staggering $240 billion in just one month. This significant surge raised significant concerns regarding the nation’s financial stability.

As the national debt surpassed $34 trillion in early 2024, these concerns only intensified. The debt pile has seen a steep ascent since 1982, after crossing the $1 trillion mark.

In light of the growing debt crisis, former Treasury Secretary Robert Rubin called for tax hikes in January to address the federal deficit, warning of “enormous” risks. He likened the current situation to the early 1990s when budget-tightening measures were enacted under President Clinton to curb the deficit.

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