Deutsche Bank warns in a research report that the U.S. is on a path toward a debt crisis. Whereas past deficits were mainly based on the business cycle – deficits rose when tax receipts were down – today deficits are reaching new highs despite robust revenue. And whereas other counties with huge deficits are simultaneously accumulating foreign assets, the U.S. is accumulating foreign debt. Given this trajectory, we need clarity as to what options we have, and what level of pain they imply.
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