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Problems building for years

On the surface, things don’t look good. U.S. national debt soared to $34.2 trillion by Feb. 14, according to the real-time U.S. Debt Clock.

That total is more than the combined GDP of the top five global economies after the U.S. — China ($17.9 trillion), Japan ($4.2 trillion), Germany ($4.0 trillion), India ($3.4 trillion) and the United Kingdom ($3.0 trillion) — according to World Bank data.

As of Jan. 31, the U.S. federal budget deficit — the difference between government spending and revenue — was at $1.75 trillion. And the U.S. debt-to-GDP ratio — the ratio between a country's government debt and its GDP — is currently at 123%, according to the World Economics GDP Database.

“It would be good if we could get our financial house in order,” Schwarzman stated — but he doesn’t think the U.S. is headed for a “big financial problem.”

“Usually financial crises come when you don’t expect them and they come quickly,” the 76-year-old private equity boss pointed out.

The current problems in the U.S. have been building for years and they seem to be on a slow and steady path to recovery — unless, of course, another macro event throws things off course.

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‘Optimistic for 2024’

Despite seemingly dissing so-called Bidenomics and raising alarm bells over what could happen to the U.S. economy, Schwarzman also claimed to be “optimistic” for 2024.

He told Bloomberg the economy has slowed — “that’s normal with high interest rates” — but he expects rates to come down in the second half of the year.

“We will get the [rate] cuts,” he said, with absolute certainty.

Why is Schwarzman so confident? Because Blackstone — the world’s largest alternative asset manager, with $1 trillion in assets under management — is currently measuring U.S. inflation at around 2%, which happens to be the Fed’s inflation target.

This is far better than the latest Bureau of Labor Statistics inflation data, for January, which came in at 3.1% — with the shelter index remaining an outlier at 6%.

“They’re looking at 6% in rents and residential real estate [inflation] and we’re the largest owner of residential real estate and we think it’s 0-1%,” said Schwarzman.

“Let’s bet on us [Blackstone] on this one because we’re the people actually doing it. And if you correct the index for that difference between what’s really going on [in residential real estate] and [what] they’re saying is 6.2%, you get around 2%.”

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About the Author

Bethan Moorcraft

Bethan Moorcraft

Reporter

Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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