US public gloom deepens as debt tops $40.5 trillion and inflation fears grow

The United States, the world's largest economy, is going through a difficult phase, and anything that affects it has a far-reaching global impact. The American economy had been performing well for some time, yet its steadily growing debt has become a major turning point. Inflation has risen sharply in recent times.

To rein it in, the Federal Reserve raised interest rates in September. Another increase is being predicted for December.

Ordinary Americans are deeply disappointed about their economic situation. Some 41 per cent of consumers believe their circumstances will worsen over the next 12 months. The figure has tripled since the second quarter of 2024. Even during the 2008 financial crisis, only 23 per cent of people were pessimistic about their future.

In the 1970s and 1980s, inflation, measured by the Consumer Price Index (CPI), was above 10 per cent. Even then, people were not so despondent about their future. The US is not in recession at present, but people have begun to feel its heat. Some 31 per cent of American consumers believe their financial condition will worsen over the next five years. This is double the rate in the 1980s.

Now to the debt. US debt has risen above $40.5 trillion. In 1990 it was $3.2 trillion. A large share of government revenue is now going towards paying interest on this debt. According to first-quarter figures, per capita debt in the US was $224,000. This includes government, household and corporate debt.

There is little prospect of relief on the inflation front either. Inflation in the country could stay high for a long time. Fuel prices have recently given inflation considerable momentum. According to market estimates, there is a 75 per cent chance of an interest rate rise in December. Because of the midterm elections, the Fed refrained from raising rates at its latest meeting. Only a year ago, the market expected three rate cuts by 2026.

Crude oil is also a concern. The midterm elections are to be held on November 3. It is believed that fresh attacks on Iran could follow afterwards, raising fears that crude prices will climb further. Crude prices have already risen 14 per cent in October. On Friday, Brent crude closed up 2.37 per cent at $113.4 a barrel.