Are the US and UK heading towards debt crises?

The answer is: not likely, as long as there is no premature monetary tightening. The reason is that the debt services burdens in both the US and the UK are still low.

With massive amounts of fiscal stimulus and financial bailouts, as well as costly healthcare reform programmes, US public sector debt is projected to rise by at least 40% in the next five years to over 100% of GDP from the current 70%. This has raised fears that the US may soon hit a debt wall, when no one would want to buy its Treasury debt. In such a case, US interest rates would soar and the loss of confidence in the US would lead to a US dollar crash. Similar concerns have arisen in the UK, where the HM Treasury estimates that its public debt, after rising from 30% of...

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