John Waldron, president of Goldman Sachs, warned that runaway spending could pose a major risk to the United States in the event of a political crisis.

"what I'm worried about is that the political crisis and the high leverage in the national debt system happen at the same time," Waldron said at an event organized by Semafor. "the higher the leverage, the greater the risk. So I hope Washington can control spending. "

Waldron points to the market turmoil caused by the pension funds that rocked the UK in 2022. British pension funds have adopted a strategy known as debt-driven investment (LDI) to protect themselves from falling government bonds. Then, after Leeds Truss, then prime minister, announced unfunded tax cuts and plans to increase government spending, bond yields soared, exposing a major risk at the heart of the UK financial system.

"think about the LDI incident in the UK. That was actually the result of a political crisis, "Waldron said. The Truss government budget at that time did not have much credibility. Then there was a sell-off in gilts. Then we found that there was a leverage structure in gilts in the process. "

Waldron said that if there is a political crisis, the United States may also have this kind of upheaval, "so I think we should worry about that."

The Waldron said the US could not take the dollar's reserve currency status for granted, noting that US households had been filling the gap because of the lack of overseas buyers such as China, who have historically bought US Treasuries. He points out that there is an assumption that more and more wealth in the US will continue to flow into US Treasuries because people are reassured that there will be no replacement for the dollar for quite some time to come.

Waldron said: "MarvelcasinonodepositIf you bet that the situation will continue to be so, that is the next big bet. "