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Peter Davis

An writer at FOMOdrive

  • Oct 19, 2023
  • 2 min read

US dollar at risk of losing reserve currency status - Jeffrey Gundlach

The renowned "Bond King" forecasted that the US dollar would no longer maintain its status as the world's reserve currency.

The USD will be impacted by large budget deficits and increasing interest rates.

The US national debt has skyrocketed to a staggering $33.6 trillion, with an increase of $2.4 trillion in the past year alone.

The collapse of the US government bond market persists.

Jeffrey Gundlach, CEO of the investment company DoubleLine Capital and known as the “king of bonds,” has warned that the dollar's status as a reserve currency is in jeopardy.

He believes that the large budget deficit and increasing interest rates on the US national debt should be a cause for alarm for all Americans. As interest rates go up, it becomes more difficult to pay off the US government debt, resulting in an even larger debt.

By October 18, the US national debt had already climbed to an astonishing $33.6 trillion. This is a sharp increase from the $2 trillion borrowed in the previous six months due to debt ceiling issues.

Gundlach warned that if the US Federal Reserve continues to raise rates, the national debt problem could become much more severe. He urged for the budget and spending to be managed carefully in order to protect the future of the US dollar.

Gundlach predicts that, with the Federal Reserve's current borrowing costs, the average US debt rate could eventually reach 5.5%. This would cause annual payments on the national debt to skyrocket to $1.8 trillion annually, making it the largest item in the budget.

Amid the US government bond market's ongoing decline, the release of the US budget data for September has been delayed since the end of last week. This comes as the yield on 10-year Treasuries has reached a new multi-year high of approximately 4.93% on Wednesday.

JPMorgan Chase predicts that the increasing federal budget deficit will cause an overabundance of government bonds, which will exceed the demand for them.

In August, the international rating agency Fitch downgraded the United States' highest credit rating due to its large debt burden, continuous increases in the borrowing limit, budget deficit, and the potential for recession.

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