MACRO

The US National Debt Is Rising Nearly $10B Per Day, But the US Dollar’s Strength Would Have You Think That’s No Problem

Does debt matter? For the average American, definitely. But for the US government? Not so much. The US has been operating in the red for the vast majority of its existence — issuing bonds to fund everything from wartime efforts to scientific advancement. But since 2001, the national debt has ballooned to $35T and is only accelerating.

America’s debt problem: Thanks to higher interest rates, the national debt is now rising nearly $10B per day. That’s drawn the ire of the International Monetary Fund (IMF), which warns that the country’s spending habits aren’t just a possible problem at home — but also a global risk to economic stability.

• The IMF says US government spending is “out of line with long-term fiscal sustainability” and warns that funding costs could spark higher inflation, destabilizing less-industrialized nations.

• Factors contributing to this surge in debt include the pandemic, Republican tax cuts, and bipartisan investments in infrastructure — creating multi-trillion dollar deficits over the past three years.

Dollar in demand

Despite its warning, the IMF conceded that some of the US’ spending has fueled its strong economy and, in turn, global growth. That makes last year’s $1.7T deficit, the third-highest since 2001, seem a little less innocuous. But the side effect of all that spending has been stubbornly high inflation, which risks keeping interest rates higher for longer. And after March’s strong inflation read, analysts predict just 0.38% of interest rate cuts this year — a trend that favors the US Dollar.

• Since the start of the year, the US dollar index, measuring the greenback’s strength against other major currencies, has unexpectedly risen by 4.6%.

• The USD now commands record premiums against the Indian rupee and is at its highest against the Taiwanese dollar and Japanese yen in nearly a decade.

Time to get overseas: The strong Dollar has given Americans an advantage abroad — fueling record tourism to destinations like Japan, which saw its highest-ever monthly visits in a single month in March. But this strength has also caused panic across global central banks, striving to shield their economies from the escalating costs of imports priced in USD. For US consumers, even if you’re not in the market for large orders of semiconductor chips, a trip to Asia could be a fun way to capitalize on the Dollar’s strength.

Read: Is that why a record number of US adults are planning trips abroad?

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LARGECAP RECAP

💳 Amex soars despite higher credit card delinquencies

Americans can’t stop won’t stop spending, and that’s great news for American Express ($AXP). In the latest quarter, the credit card titan saw spending rise 6% year-over-year (YoY) to $367B — led by a 9% surge in airline travel spending. But a bigger contribution to its $2.44B quarterly profit was the company’s easiest money: the annual fees on its cards.

• Revenue rose 11% thanks to higher net card fees, which soared 15% YoY due to new cardholders and higher annual fees on refreshed cards.

• The company also saw strong growth in new card openings, with 70% of the company’s new account acquisitions coming from cards with an annual fee.

Credit crunch: Amex CEO Steve Squeri tells Bloomberg that the company continues “to attract high-spending, high credit-quality customers,” but one downside of its report was more than $1.3B set aside to cover bad loans. That was within analysts’ expectations, but you have to hand it to spendthrift Americans… they keep spending, even with delinquencies at their highest point since 2012.

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Markets & Economy

Indians head to polls for world’s largest election: Turnout is looking strong so far in a race where many expect PM Narendra Modi’s Bharatiya Janata Party to win easily — even as the country’s fast-growing economy struggles with unemployment and inflation. [Read]

IRS once again waives penalties for inherited retirement accounts: Heirs must empty inherited retirement accounts within ten years of the original account owner’s death — but the IRS is (again) delaying the penalty that comes if you don’t do that amid confusion around who’s subject to the rule. [Read]

Sony ($SONY) and Apollo ($APO) may team up to buy Paramount ($PARA): Apollo has bid $26B for the entire company, but partnering with Sony could strengthen its hand. Sony/Apollo’s all-cash deal would take Paramount private — though the legacy studio is reportedly leaning towards merging with Skydance. [Read]

Business & Wealth

Iran downplays Friday night explosions: Israel reportedly initiated a limited attack in Isfahan, though Tehran didn’t single out Israel directly and said they have no plans to retaliate. Allies worldwide advocate for calm to prevent a region-wide war. [Read]

Tesla ($TSLA) recalls 3.9K Cybertrucks…amid other headaches: Faulty pedals can cause unintended acceleration in the boxy trucks — prompting the carmaker to offer free fixes. Despite the recall and stock decline, Musk is still vying for that $56B pay package. [Read]

Netflix ($NFLX) to stop reporting subscriber growth, focus on revenue instead: The streamer’s password crackdown has piled in new subscribers, powering a 76% stock rally over the past six months. But now, it prioritizes revenue growth as a steadier, more predictable metric. [Read]

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DIGIT OF THE DAY

US Motor Fatalities Dropped 3.6% Last Year, But The Big Picture Is Still Alarming

We’re reminded to look both ways before crossing the street, yet many American drivers seem to overlook this basic safety rule entirely. Last year, the number of American fatalities from motor vehicle crashes fell 3.6% from 2022. Despite the improvement, the rate is still three times higher than in other developed countries. And after 50 years of declining fatalities, accidents have continued to increase since 2014 — coinciding with growing cannabis legalization across states, the widespread use of smartphones, and rising homelessness.

• One study found that 55.8% of serious accidents involved drivers who tested positive for at least one drug or alcohol — led by cannabis, which was found in 25.1% of cases.

• US homelessness has surged 19% since 2016 — with a striking statistic from Portland showing that 70% of pedestrians fatally killed in 2021 were experiencing homelessness.

Pointing blinkers: Various studies have attempted to pinpoint the reasons behind the rise in accidents. Factors include a preference for larger vehicles, increased distractions, and a more relaxed attitude toward road safety. Unfortunately, consumers are paying the price in the form of higher insurance costs, which jumped 22% in March compared to the previous year.