Big Risk Surging Debt Makes U.S. More Dependent on China Russia Gulf States: Tech Ticker, Yahoo! Finance Surging Debt Makes U.S. More Dependent on China, Russia, Gulf States But there's an even bigger financial institution with greater debt and an increasing level of bad loans on its books: The U.S. government.
Given the actions already taken, from the Housing Bill to the nationalization of Fannie Mae and Freddie Mac,
the U.S. deficit could double to $800 billion in two years, says
Nouriel Roubini, of NYU's Stern School and RGE Monitor. (Even worse,
the official government deficit figures exclude the costs of the wars in Iraq and Afghanistan, as well as the unfunded liabilities of Social Security and Medicare.)
The big risk is that
foreign holders of Treasuries will no longer accept low interest rates to help fund U.S. debt spending, says Roubini, noting countries like
China, Russia and oil-producing nations in the Middle East have becoming increasingly important holders of Treasuries. Should they demand higher rates to hold U.S. debt or, worse, dump their holdings, it could have profound ramifications on the U.S. economy and the value of the dollar.