Renowned economist and ‘Black Swan’ author Nassim Taleb has raised concerns about the growing US debt, likening it to a “death spiral” that may require a “miracle” to avert. Speaking at a business event on Monday, Taleb characterised the expanding US debt load as a “white swan,” signifying a risk event that is highly predictable and more probable than a “black swan” event, which describes an unexpected occurrence.
Taleb pointed out that the continuous extension of the US debt limit and political reluctance to address the issue head-on could lead to a debt spiral, which he equated to a “death spiral.” He expressed scepticism about the political system’s ability to tackle the mounting debt problem, stating, “So long as you have Congress keep extending the debt limit and doing deals because they’re afraid of the consequences of doing the right thing, that’s the political structure of the political system. Eventually, you’re going to have a debt spiral.”
US Treasury Secretary Janet Yellen recently acknowledged the concerning level of US public debt, describing it as a “scary number.” The country’s federal debt surpassed $34 trillion for the first time in history at the end of December 2023, translating to approximately $102,000 for an average American family of three. The debt increased by more than $4 trillion in 2023 alone.
Taleb, a former trader known for his bestselling books on economics, emphasised that white swans, including the US deficit and the American economy’s vulnerability to shocks, indicate a globalised world where problems in one region can have ripple effects worldwide.
Responding to inquiries about how the US “debt spiral” might unfold, Taleb stated, “We need something to come in from the outside, or maybe some kind of miracle.” His assessment of the situation left him “kind of gloomy about the entire political system in the Western world.”
As the US faces unprecedented debt levels, Taleb’s warning highlights the urgent need for a comprehensive and sustainable approach to address the economic challenges posed by the escalating national debt. The implications of a potential “death spiral” are a stark reminder of the importance of responsible fiscal policies in safeguarding the nation’s economic stability.