US Debt Ceiling Raises Concerns of Financial Collapse

Ray Dalio Warns of Inflationary Risks and Unsustainable Debt Levels

The US debt ceiling issue continues to cast a dark shadow over the economy, positioning it on a perilous path towards a potential financial collapse.

Renowned investor Ray Dalio has once again voiced his concerns about the consequences of unchecked debt issuance, emphasising that excessive spending and mounting debt only serve to exacerbate inflation rather than curbing it.

Across the globe, governments are shifting the burden of inflation onto consumers and mortgage holders by implementing higher interest rates and escalating living costs. Paradoxically, these very same governments persist in overspending without considering the detrimental impact their actions may have on the persistence of inflation.

Dalio asserts that this trajectory is unsustainable, explaining, "Increasing debt assets and liabilities faster than income eventually makes it impossible to simultaneously pay lender-creditors a high enough real interest rate to hold the debt assets, while keeping the real interest rate low enough for borrower debtors to service their debts." In simpler terms, this implies that the ability to repay the debt becomes compromised, paving the way for a potential default.

In addition to the concerning debt situation, other economic news for the week has presented alarming indicators. The Empire State Manufacturing Survey hit a significant low, recording a negative 31.8% print, as discussed earlier this week. US economic indicators for April also showed a negative 0.6% figure, marking the 13th consecutive month of decline and strongly indicating the possibility of a forthcoming recession or period of economic contraction later this year. Justyna Zabinska-La Monica, senior manager of business cycle indicators at the Conference Board, stated, "The Conference Board forecasts a contraction of economic activity starting in the second quarter, leading to a mild recession by mid-2023."

While the Federal Reserve (Fed) is striving to engineer a smooth landing during this period of monetary tightening, the absence of growth in manufacturing and the real economy paints a grim reality. The prospect of a controlled period of economic decline may, unfortunately, remain nothing more than wishful thinking.

Note: The information provided in this news article is based on hypothetical data and does not reflect real-time or actual events.

Gold Futures Technical Analysis

Gold Futures monthly analysis continues to recommend a STRONG BUY with Weekly analysis adjusting down slightly to a BUY signal.

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Summary for Monthly Forecast: STRONG BUY

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