Surging US debt can no longer be overlooked, top investor warns

SURGING US debt and “irresponsible” government borrowing are threatening the future prosperity of Americans, one of the world’s top investors has warned.

Ken Griffin, founder of US hedge fund Citadel, said the country’s ballooning debt pile was a “growing concern that cannot be overlooked”.

In an annual letter to Citadel’s investors, he said: “We must stop borrowing at the expense of future generations. The Western world urgently needs a significant increase in productivity growth as the burden of rising government debt and entitlement spending strains almost every major economy.”

Global debt surged to a record high of $313trillion (£248trillion) last year, according to the Institute for International Finance.

Debt has surged as inflation and higher interest rates forced more borrowing. In the US, government debt is currently hovering around $34.5trillion. It has surged under successive administrations and is forecast to rise to 102.3pc of GDP by 2025 under Presi- dent Joe Biden’s budget plans. Spending is being stepped up as the White House directs billions into net zero projects.

The spending blitz follows a surge in borrowing during the pandemic to support people and businesses. The scale of borrowing is increasingly alarming investors. Rating agency Fitch last year stripped the US of its triple A rating because of the rising debts.

Mr Griffin said: “As we have cautioned over the past year, the surging US public debt is a growing concern that cannot be overlooked.” The warning from billionaire Mr Griffin carries extra significance given he runs one of the world’s largest fund managers. Citadel manages about $60bn of assets and invests across stock, bond and currency markets.

Phillip Swagel, head of the Congressional Budget Office (CBO), the independent agency which analyses US public finances, recently warned that the “unprecedented” US debt surge puts the country at risk of a Liz Trussstyle market meltdown. Citing data from the CBO, Mr Griffin said US government spending was on track to reach 3.1pc of GDP.

That would be a full percentage point higher than the average spending rate from 1974 to the present day. Despite the drumbeat of warnings about rising debt levels, neither President Biden nor his Republican opponent Donald Trump have put forward plans to raise any taxes or cut spending in a bid to tackle the deficit.

Despite the debt gloom, Mr Griffin was more upbeat about the prospect for bond markets, saying that there was a more “favourable” climate because of easing inflation. Consumers are also likely to benefit as inflation falls and wages grow, he added.