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How debt could lead to the end of US capitalism

via CNBC
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The Danish investment bank Saxo predicts a potential demise of capitalism in the U.S. in 2024 due to the country’s massive debt problem.

This prediction is based on the government’s likely need to take dramatic measures to control its finances, potentially leading to the end of capitalism.

Althea Spinozzi, head of fixed income strategy at Saxo, claimed that capitalism will end “as money rotates from private corporations to the public, and holding riskier assets becomes more expensive.”

“Despite the government’s failure to resolve inequality, lower borrowing costs extinguish social unrest. What follows is a long period of nationalisation and government intervention in critical sectors that are struggling to attract capital,” Spinozzi continued.

The scenario involves a surge in budget deficit, increased inflation, and the government making capital gains and interest income from government bonds tax-free.

This could lead to a shift of money from private corporations to the public sector, causing a collapse of the stock market and a period of nationalization and government intervention in struggling sectors.

Saxo’s chief investment officer also expressed concerns about the government’s growing role in the economy, suggesting that the hand of the government is becoming heavier and heavier, potentially leading to a government-run economy.

Saxo chief investment officer Steen Jakobsen said, “People are putting question marks on the U.S. debt and its ability to be refinanced. In economics lingo, we have a stock problem, which is the size of the debt, and we have a flow problem, which is the ever-increasing new (Treasury bond) issuance that we see.”

Jakobsen said “a lot of people would actually argue we already killed capitalism.”

He added that the “hand of the government is just getting heavier and heavier.”

Jakobsen blamed “regulation, wokeness, ESG [and] all of the frameworks that sit outside the actual clearing of prices in the [stock] market.”

“We know that the government sector — both in GDP terms, but also in absolute productivity terms — is far less efficient than the private market,” explained Jakobsen.

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