Investor Mark Larry thinks America that spends a lot could be headed for crisis

Investor Mark Larry thinks America that spends a lot could be headed for crisis

Mark Larry, who makes a living investing in struggling companies, believes the United States is potentially heading in that position.

While he’s not sure when and doesn’t expect major problems anytime soon, the billionaire head of Avenue Capital hedge fund and owner of the Milwaukee Bucks sees high levels of public debt end. by causing problems.

“How long can you keep borrowing zero dollars?” Lasry said at the SkyBridge SALT conference in New York on Tuesday. “If it starts to escalate, we’ll have real problems. “

Larry noted the government’s ability to borrow at lower cost to close the budget deficit, which is expected to exceed $ 3 trillion for the second year in a row. The national debt now stands at $ 28.4 trillion and generated $ 524.7 billion in interest charges for the first 10 months of fiscal 2021, even with rates on Treasury loans close to their lowest records.

When asked if he thought America was “not capable on the road” before the debt problem became a reality, Larry replied, “I think you are”, but it is not certain that it is the day of the accounts. when will he come.

“You can’t just borrow as much as we borrow,” he said. “It comes at a real cost. “

One of the reasons the United States has been able to borrow so much without a major economic impact is that the Federal Reserve has kept benchmark interest rates around zero. The Fed has indicated that it is in no rush to raise rates, although it could start cutting back on its monthly bond purchases before the end of the year.

Larry has widely praised the role of the central bank during the COVID-19 pandemic.

Not only has the Fed kept rates low and extended its balance sheet to over $ 4 trillion, but it has also instituted a series of programs that drain liquidity from the bond markets where hedge fund bosses make their money.

At the onset of the crisis, a sales panic coupled with a shortage of buyers forced the Fed to intervene in both the treasury and corporate debt markets.

“The Fed makes sure the system keeps running and people have access to liquidity,” Larry said.

However, he is still concerned about the financial size of the country.

Congressional Democrats want to spend more than $ 3.5 trillion on spending to improve infrastructure and climate change mitigation, in addition to the more than $ 5,000 billion that has already been spent on stimulus efforts focused on pandemic over the past year and a half. left.

“This big dollar is spent, and hopefully the economy will be able to pay it back,” Larry said.

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