Billionaire investor Ken Fisher 'debunks' debt-crisis risk Ray Dalio warned of - borrowings are 'not the problem you think it is'
- Veteran investor Ken Fisher has waved aside concerns that the US is on the brink of a debt crisis.
- Fisher is paying attention to the cost of servicing the debt – not the overall figure itself, which for him just represents a record of past spending.
Billionaire investor Ken Fisher has sought to quell concerns about a possible US debt crisis, after a recent political standoff over the government's borrowing limit fueled fears of a sovereign default.
Since an eleventh-hour political deal averted a payment default in early June, the Treasury has already borrowed more than $1 trillion – bringing its total tab to almost $33 trillion. This astronomical figure has worried many Americans: high-profile investor Ray Dalio warned the nation is at the start of a "late, big cycle debt crisis."
But Fisher himself is much more relaxed.
Speaking in a recent Youtube video, the founder of Fisher Investments stressed that the cost of the borrowings – relative to the size of the economy and the country's ability to afford the obligations – is what really matters, and not the overall level of debt itself. Currently, that metric is at moderate levels similar to those seen in 1980 or even as far back as 1950, he added.
"From 1989 to 2000, we were much higher than we are now," he said, referring to the carrying cost of US government debt. "If we could carry it then, we can carry it now."
The manner in which the US avoided a payment default on its borrowings last month attracted prominent critics from all sides. Among the most vocal was Bridgewater Associates founder Dalio, who rated the debt-ceiling deal Grade D and predicted the start of a debt crisis, caused by a demand-supply mismatch.
"In my opinion, we are at the beginning of a very classic late, big cycle debt crisis, when the supply-demand gap, when you are producing too much debt and have a shortage of buyers," Dalio said last month.
But Fisher urges the public to perceive the debt situation differently, saying it's important to monitor the eventual allocation of the borrowed funds into parts of the economy.
"In terms of it being some catastrophic thing, the debt, to our society, today it isn't it isn't gonna be anytime soon – and what you should really focus on is the spending, not the debt."