'Big Short' Iceman "No Real Signs of a Problem"
'Black Swan' Taleb "Debt Vicious Cycle = Death Spiral"
Amid recent concerns over the rapid increase in U.S. debt and a stock market bubble, experts' forecasts are divided.
On the 30th (local time), according to Bloomberg, Steve Eisman, senior portfolio manager at Neuberger Berman, stated that despite concerns about the U.S. market, he is making more long-term oriented investments.
Recently, the U.S. stock market, led by tech stocks, has surged sharply, prompting comparisons to the dot-com bubble era. According to the U.S. Treasury, the federal government debt, which was around $31.4 trillion (approximately 41,888 trillion KRW) at the beginning of 2023, has rapidly increased to exceed $34 trillion (approximately 45,356 trillion KRW) by the end of December. If this trend continues, interest on the debt alone is expected to skyrocket to $5.4 trillion (approximately 7,024 trillion KRW) by 2053.
However, Eisman expressed optimism at the iConnections Global Alt Conference held in Miami, U.S., stating that there are no tangible signs that the increasing fiscal deficit is causing problems for the market or the U.S. government. He said, "Debates about the deficit have been ongoing for the past 40 years," and added, "There is no reason to worry until there are actual signs of a problem."
Eisman is known as one of the real-life protagonists of the movie The Big Short. He gained fame for predicting the 2008 global financial crisis triggered by the U.S. subprime mortgage collapse.
Bloomberg evaluated that this perspective reflects the overall sentiment of the U.S. market, which has shown remarkable resilience and growth. Some of last year's darkest forecasts have yet to materialize. The International Monetary Fund (IMF) has raised its global growth outlook for this year, reducing the likelihood of a global recession.
This contrasts with remarks made the previous day by Nassim Nicholas Taleb, a New York University professor famous for authoring Black Swan. At a Universa Investments event, he said, "Congress keeps extending the debt ceiling and making deals because it is afraid to do the right thing. This is a structural problem of the political system, and ultimately, it will lead to a vicious cycle of debt," adding, "The debt spiral is a death spiral."
Professor Taleb defined the surging debt burden and a more vulnerable economic structure compared to the past as a "white swan." This is more dangerous than an unexpected event like a "black swan" because globalization has made the world more interconnected, allowing problems in one region to spread globally.
Taleb is not alone. Earlier, former U.S. Treasury Secretary Robert Rubin described the fiscal deficit situation as "terrible" and said taxes must be raised to prevent further deterioration. Philip Hildebrandt, Vice Chairman of BlackRock, warned that any default could jeopardize the value of the dollar as a global currency.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
