The US is facing a debt storm

8.14.23 - 

Gold last traded at $1,907 an ounce. Silver at $22.57 an ounce.

The US is facing a debt storm. Here's 5 charts that show trouble is brewing. -Business Insider

A storm of public and private debt is brewing in the US - and the troubles are already beginning to show on the surface as loans pile up and borrower confidence falters.

At a broad level, Fitch Ratings' downgrade of the US credit rating and Moody's downgrade of 10 US banks this summer points to issues for both US sovereign credit (political polarization hampering the US's ability to meet debt obligations) and debt originated out of the banking sector (structural pressures stemming from tighter credit conditions and Fed policy).

But there are more granular problems mounting across debt markets as well, as both private and public sectors face a drastically different environment than they did in the previous decade when interest rates were at historic lows coming out of the 2008 crisis. If low rates spurred the sugar rush of heavy borrowing, rising interest rates may be setting the stage for the sugar crash.

This was on full display earlier this year as Silicon Valley Bank imploded, driven by mismanagement of its balance sheet which was weighed down by a bond portfolio that was rapidly depreciating as interest rates climbed. SVB, Signature Bank, and First Republic all fell in quick succession.

The fallout from that event was relatively contained, but that hasn't stopped market pundits and investing icons from sounding the alarm on high debt levels in the era of rising rates. Hedge fund legend Ray Dalio and top economist Nouriel Roubini are among those who have warned a full-blown debt crisis could be on the way.