Will the US pay a price for its high fiscal deficits?

The US is running a fiscal deficit of 6 per cent of GDP or gross domestic product, even though its economy is strong. Investors treat America exceptionally, says best-selling author Ruchir Sharma, but there will be a limit to this. The key question is when they will pivot.

If any other country continues to run high fiscal deficits on a sustained basis, it gets punished, he points out. Bond markets revolt, withdrawing capital and sending currencies tumbling. “But if America runs high deficits, it leads to higher interest rates and sucks in more capital.



When is this going to shift? That is the big question over the next few months. I can’t believe it can go on,’’ he says. Already a subscriber? Log in Get exclusive reports and insights with more than 500 subscriber-only articles every month $9.

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