Renowned billionaire Jeffrey Gundlach, also known as the “Bond King,” has raised concerns over the potential risk to the U.S. dollar’s reserve currency status due to rising national debt. “The future of the U.S. dollar, and possibly out-of-control inflation, depends on getting the budget and spending under control,” Gundlach warned.
Jeffrey Gundlach on Future of U.S. Dollar
Jeffrey Gundlach, the CEO and chief investment officer of investment management firm Doubleline, has warned that the U.S. dollar’s reserve currency status may be at risk if the United States does not get its spending under control. Gundlach is nicknamed “the Bond King” after he appeared on the cover of Barron’s as “The New Bond King” in 2011. His net worth is currently $2.2 billion, according to Forbes. His firm oversees around $150 billion of assets under management (AUM).
Gundlach said in an opinion piece: “Should the Federal Reserve continue to raise rates, which may happen, or should the national debt grow, which is certain to happen, this problem will get much worse.” He emphasized:
The future of the U.S. dollar, and possibly out-of-control inflation, depends on getting the budget and spending under control.
The weighted average interest rate on U.S. Treasury debt was 2.92% in August, up from 1.97% in the same time period last year. The billionaire stated that the interest rate on U.S. debt could increase to 5.5% given the current level of Federal Reserve borrowing costs. He elaborated that in such a scenario, the nation’s annual interest bill would surpass $1.8 trillion, which is over twice the existing defense budget. Within just over two years, interest expense has surged from $500 billion to almost $900 billion, already surpassing defense spending.
Gundlach opined:
The massive budget deficit and increasing interest rates on the national debt should scare every American.
The Doubleline executive isn’t alone in issuing warnings about the U.S. debt level and the USD. JPMorgan CEO Jamie Dimon recently expressed concerns that the fiscal money being spent in the U.S. “is so big,” noting that it is “the largest in peacetime ever … with very high deficits and QT we’ve never had.” Dimon also raised concerns about the potential for stagflation. Meanwhile, renowned investor Jim Rogers has warned that the era of U.S. dollar dominance is ending, with the Chinese yuan as the sole contender to replace the USD. Additionally, global financial services firm Jefferies cautioned earlier this month about the potential collapse of the U.S. dollar.
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