Blackstone CEO Stephen Schwarzman.
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The dollar and US stocks could come under threat if the government doesn’t “keep some discipline” on debt, according to Blackstone’s CEO.
“When there’s a crisis in the world, they buy our securities – now that doesn’t last forever,” Stephen Schwarzman said.
His warning comes after Fitch slashed the US’s credit rating last week.
Rising debt could erode the long-term dominance of both the US dollar and American stocks, Blackstone’s CEO has warned.
Stephen Schwarzman said Friday that Fitch’s move last week to slash the country’s credit rating isn’t an economic disaster, but the appeal of US-linked assets could start to fall if government debt carries on piling up.
“The US is the US, we are the reserve currency, we do defend a large part of the world, including people who have triple-As,” he told CNBC’s “Squawk Box”.
“When there’s a crisis in the world, they buy our securities – now that doesn’t last forever if you don’t keep some discipline,” Schwarzman added. “So in a way, [Fitch’s downgrade] is a bit of a shot across the bow.”
Fitch cited the “steady deterioration” of US governance and a rising debt pile when it cut its score for the US from the top-tier AAA to AA+.
Its downgrade comes just two months after President Joe Biden and House Republican leader Kevin McCarthy reached an 11th-hour deal to stop a debt default.
Neither that near-catastrophe nor Fitch’s latest announcement are expected to stop the US from racking up debt, with the government likely to borrow over $5 billion a day for the next decade, according to estimates by Bank of America.
Investors have been flooded with good news in recent months – with the US economy surging, inflation rapidly cooling, and the jobs market still looking resilient – but Fitch’s surprise move still rattled Wall Street.
“I agree it’s not gonna make a huge difference in really any way for the debt markets, but it is a little shocking when somebody wakes up and says ‘I’m not so enthusiastic about your system’,” Schwarzman said.