Opinion: The U.S. is playing a game of COVID denial and the financial cost to Americans is dangerously high
Investors are convinced that the COVID pandemic is temporary and a return to normality is inevitable. What gets us into trouble, as Mark Twain knew, is “What we know for sure that just ain’t so!”
As is increasingly evident, the costs of COVID and the U.S. response have profound implications for the upbeat outlook supporting elevated financial asset prices.
The pandemic hit a weakened U.S. economy that has never fully recovered from 2008. Only massive government intervention prevented collapse. But government support has increased public debt significantly. This will rise further due to continuing U.S. budget deficits, likely to average 4.2% of GDP through 2031, well above the 50-year average of 3.3%. Federal debt held by the public is projected to climb to 107% of GDP (surpassing its historical high) in 2031.
This debt will have to be paid for either by higher taxes, cuts in spending, Federal Reserve funded government…
