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Escaping the debt trap

U.S. gdp for the 3 quarter was published yesterday. There was a consensus of 4.7%, and the first estimate came even stronger than expected at 4.9%. To this real growth, we need to add the PCE, the inflation for the economy, at around 3.5%, if we want to calculate nominal gdp growth. The economy is therefore growing at roughly 8.4%. On the other side of the spectrum, the U.S. debt is expected to grow approximately 6% this year, which doesn’t significantly improve the ratio of debt to gdp. In the meantime, the fiscal deficit keeps increasing at an alarming rate. The U.S. will need to maintain this level of growth, and high inflation, for some time if it wants to escape the debt trap. Both infrastructure investment and Artificial intelligence will need to contribute significantly to gdp to avoid the debt trap.

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