Is a US fiscal crisis ahead?

Is America in fiscal trouble? Concerns about The US deficit have surged, but worries about the fiscal situation of The United States are nothing new. So is this time really different? I'm Alison Nathan, and this is Goldman Sachs Exchanges. Each month, I speak with investors, policymakers, and academics about the most pressing market moving issues for our top of mind report from Goldman Sachs Research. This month, I spoke with two people who have long worried about The US fiscal trajectory, economist Ken Rogoff, a professor at Harvard University, and historian Neil Ferguson of Stanford's Hoover

I think the big change is that global long term real interest rates have risen. In my opinion, they've normalized The whole stuff about lower forever secular stagnation was always wildly overblown. And I've been debating this for over a decade saying that if you look at the longer term behavior of real interest rates, they go in cycles, but there's a lot of regression to mean, and no one should have ever planned on there being low forever. So a lot of what you're calling fiscal concerns is a much broader movement towards higher interest rates that has to do with, well, certainly higher global

is this all about the rise in real interest rates, or do we have deeper issues? We'd

feel a lot better if rates were just lower. That's the biggest piece of it. But, of course, in The United States, our debt is much higher now. There may be people who say it's irrelevant. But, actually, when you're a large debtor and interest rates go up a lot, it affects you a lot. So we're much more vulnerable to higher interest rates.

And here's Neil Ferguson on why this time is different.

I've been warning for twenty years that The United States is on an unsustainable fiscal path. And there are times when people like me have felt like the boy who cried wolf, but one of the lessons of history is that great power like The United States, which is the number one military power in the world, which has the privilege of issuing the reserve currency, which is issuing securities that are seen as risk free, it can light a lot of matches in the dynamite room and get away with it. But at some point, the sentiment shifts. And I think we've seen a shift in sentiment this year, and it's been

when and how would a crisis manifest? Here's Ken Rogoff's take.

I would point to the old saying, Rudy Dornbusch said it very eloquently, but I think it goes back to Herbert Simon, which is financial crises take longer to happen than you think they should. And when they do, they unfold faster and harder than you think they could. And I think we're looking at some sort of endgame to this over the next few years. And

so when you say we're nearing an end, are you basically saying that you think we're on the verge of a crisis, a debt crisis? How would you define that? Well,