During his recent appearance on "Cavuto: Coast to Coast," Dent, the founder of HS Dent and a respected financial author, expressed his concerns about the nation's mounting debt. "We’re going to have to finally have a short-term debt detox before we can get going on the next great boom," he stated.
Dent highlighted the alarming figures that underscore the gravity of the situation. "Here's the number, Neil. Nobody's totaling this up. Twenty-seven trillion in debt and deficits from the government and money printing combined since the 2008 downturn to get us through that long ditch and spending," he explained.
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He also pointed out the potential spending surge by millennials from 2024 to 2037, a trend he had predicted earlier. However, Dent cautioned that the country's "massive financial asset bubble that hasn’t deleveraged super high debt levels" could precipitate significant economic issues.
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The financial author attributed the current debt level to an overreaction in stimulus measures during the COVID-19 pandemic, a move he deemed nonsensical. As of Monday afternoon, the national debt, which represents the amount the U.S. owes its creditors, had escalated to $34.6 trillion, according to the Treasury Department. This figure marks a substantial increase from the $907 billion debt level recorded four decades ago.
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April 12, 2024
Dent anticipates that the Federal Reserve will have to take stringent measures, predicting that the impact of these actions will be felt by Americans in early to mid-next year. He attributed the debt crisis to the Fed's 525 basis points, which he claimed had triggered the "deepest recession" in 1980 and subsequent tightening.
The Federal Reserve recently raised rates to their highest level in two decades, with the benchmark federal funds rate currently standing at a range of 5.25% to 5.5%. This move followed inflation reaching a 40-year high of 9.1% year-over-year in June 2022, which has since declined to 3.2% as of February 2024 – a figure that still exceeds the Fed's 2% target rate.
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Dent criticized the overstimulation of the economy, which he said led to over-investment, overspending, and over-borrowing. "So, they're borrowing from the future already. Then, when you turn around and have to clamp down because you created 9.1% inflation overnight in a zero-inflation economy, by the way, and that's another thing my indicators have been predicting for a long time," he emphasized.
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He warned of the impending consequences of this overstimulation, stating, "Then you get this mess like, oh my gosh, now you're going to force all this debt in excesses to suddenly deleverage."
According to Dent, the economy has a tendency to overdo things and then deleverage, detoxing the debt into bad investments. However, he claimed that the economy has not been permitted to detox.
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"I think we're going to be forced with this. I'm just telling investors… Wait until this stimulus fully hits. We won't know until early to mid-next year when it hits fully. I think we're going to be in a recession before people know it," he warned.
Dent concluded by criticizing the government's interference in the economy, which he believes they do not fully understand. "They make it worse in the end," he concluded.
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