Fed's Barkin Warns: Rising US Debt Will Eventually Face a "Reckoning"

According to Jinse Finance, Richmond Federal Reserve President Barkin stated that if U.S. debt continues to rise, a “reckoning” will eventually occur, although it is hard to know when this might happen. When asked about the U.S. public debt surpassing $40 trillion, Barkin said that as long as the public keeps buying Treasury securities, the government can continue to borrow. However, he added that there is a risk that investors might start resisting further lending.

“Over time, this matter will inevitably face a reckoning. But no one can tell you exactly when that reckoning will come,” Barkin said at an event in Charlotte, North Carolina, on Tuesday. “We have the world’s primary currency, the rule of law—these are all reasons people keep buying our bonds. But, you know, one day people may stop buying your bonds, and that’s the risk we face.”

Barkin reiterated comments he made earlier this month, at that time outlining the case for keeping interest rates steady given evidence that inflation is declining, while also acknowledging that officials might have to raise rates if price pressures persist.

The Federal Reserve held rates steady at its fifth meeting in July, despite three officials dissenting in favor of a 25 basis point hike. Barkin, who does not hold a vote this year, said it is difficult to assess the extent of the rate’s impact on the economy.

After the event, Barkin told reporters that the July rate decision was a “close call.” He explained that one reason for delaying any rate adjustment is that officials will have access to two more months of economic data ahead of the next policy meeting on September 15-16.

“So far, we’ve received one full set of data, and we’ll get another full set to see what more we can learn,” Barkin said.

Policy makers from around the world will gather in Jackson Hole, Wyoming, later this week for the Kansas City Fed’s annual economic symposium. Federal Reserve Chair Kevin Walsh is scheduled to speak on Friday. He faces pressure to respond to criticism that he has not been transparent enough about his economic outlook.

Barkin noted that the latest trade dispute with Canada has increased uncertainty about how tariffs might affect prices and the economy. “I don’t think the situation with Canada itself will have a significant impact on the U.S. position, but in my view, whether we have a pretty good idea of what the final tariff rate will be—that’s the bigger issue, and I haven’t received any signals on that,” he said.