Apr 23, 2016 08:59 AM EDT

Is America Nearing A Massive Debt Crisis?

Speculations run rampant that America is actually coming towards a massive debt crisis. There are conflicting reports on the true status of the country.

Business Insider described the looming debt crisis as "toxic." Apparently, U.S. companies may soon face and be crushed by a problem of their own making.

"This level of borrowing in some sectors of the economy is now booming (with the risk of spinning out of control) to such an extent that we think that the build-up of debt on U.S. non-financial corporate balance sheets represents one of the largest mispriced risks in terms of future market stability, downside risk and future economic growth," Andrew Lapthorne, head of quantitative analysis at Societe Generale, wrote. It was noted that American corporations keep on borrowing money to fuel growth which is larger than is actually needed.

Moreover, the value of the assets supporting this debt has begun to decrease in value. One cause of this behavior is believed to be central banks.

"Aggressive monetary policy in the form of QE and zero or negative interest rates is all about encouraging (forcing?) borrowers to take on more and more debt in an attempt to boost economic activity, effectively mortgaging future growth to compensate for the lack of demand today," Lapthorne added. Nowadays, companies are said to be spending 35% more than their incoming cash flows.

Meanwhile, according to Bloomberg View, America is nowhere near to having a debt crisis. The publication described the national debt as still "modest and sustainable" and that the federal government has been "remarkably responsible in their borrowing.

Bloomberg explained that the U.S. government's debt does not mean that the country owes money. They are two totally different things.

"In other words, the U.S. deficit is now perfectly sustainable," the website wrote. "This represents a remarkable -- possibly even excessive -- display of fiscal responsibility by the U.S. government."

Get the Most Popular Jobs&Hire Stories in a Weekly Newsletter
© 2017 Jobs & Hire All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics