Hong Kong's Wande News Agency reported that recently, in order to avoid economic recession, the United States has injected a large amount of money into the market and economy through monetary and fiscal policies. However, novel coronavirus's wide spread in the United States is about to test the limit of how much debt the US government can bear. Even before the crisis, the United States was on track to increase its budget deficit to nearly $1 trillion in the fiscal year that ended on September 30.

In the five months since the beginning of the current fiscal year, that figure has reached $625 billion. Today, the U.S. budget deficit will far exceed the record of $1.5 trillion set in 2009, when the United States struggled through two years of financial crisis and recession. Moody's Corporation's Analytics estimates that the budget gap will reach $2.1 trillion this year and $1.8 trillion next year. Economist JPMorgan Chase & Co (J.P. Morgan) predicts that the US deficit will reach $1.7 trillion this year and $1.5 trillion next year. Decision Economics Company (Decision Economics Inc.) Investment is expected to be $1.9 trillion this year and $2.5 trillion next year.

There are three reasons for the surge in deficit

1) the decline in household income and corporate profits means a reduction in federal taxes

2) as the unemployment rate rises, spending on social security programs such as unemployment insurance or food stamps will increase, and these programs will be used more.

3) the U.S. government is negotiating an economic rescue plan that could add $1 trillion or more to the bill.

As the chart below shows, the rise in the US fiscal deficit is often accompanied by a rise in unemployment.

The economic outlook is so volatile that many analysts are unable to keep up with their budget forecasts. Lewis Alexander, economist at Nomura Securities, said: "We have made two major revisions to the economic outlook in the past three weeks and are now in the process of making a third revision. "

The pressure of credit default in the United States has been reflected in the bond market.

U. S. state governments are under similar pressure. Total federal debt-the cumulative deficit of the past year is now $23.5 trillion, including public debt and the debt of government agencies, such as the Social Security Trust Fund. At the rate at which debt is about to grow, its share of GDP is likely to exceed its highest level in decades. White House economic adviser Lawrence Kudlow said Wednesday that the United States must solve its debt and deficit problems at some point in the future. Although this is a special time, what is unusual about this moment is that America's debt was already so high before the current crisis.

This time, the deficit accounts for 4.7% of GDP in 2019, which is much higher than it was during the recession in 2001 and close to the level of the recession of 1990-1991. This is due to tax cuts and a surge in government spending on military and other programs. For years, economists have debated the importance of huge debts and deficits. Interest rates are extremely low, in part because of extremely low inflation, which means the US government is able to finance its borrowing at a very low cost.

Many economists have long warned that high debt levels relative to GDP are not sustainable without slowing economic growth or pushing up interest rates or inflation.In the past, when the economy was in the doldrums, investors tended to look for safe-haven assets such as Treasuries. In times of low inflation, government bonds also tend to attract investors. Both factors suggest that interest rates will remain low and that the US government will be able to continue to finance large deficits without having a negative impact. However, this is risky, and at the moment some investors have shown the idea in the bond market price. Bond investors may resent such a large Treasury bond issue and demand higher yields in return.

That would mean higher interest costs for the government, as well as many other borrowings that are usually based on Treasuries, such as mortgages, car loans or business loans. When government borrowing hurts the private sector, there is a "crowding out effect". In the 1980s and 1990s, some economists began to believe that the mere threat of higher deficits could push up interest rates and offset the boost to growth sometimes generated by larger deficits through increased government spending or tax cuts.

Thomas Simons, senior vice president of Jefferies LLC, said the figures for these fiscal stimulus packages are frightening because the supply of government bonds will hit the market in the short term. Us long-term bond yields rose in recent days earlier this week. The yield on the 10-year Treasury note rose from 0.6% on March 9 to more than 1.2% on Wednesday. Roberto Perli, an economist at research firm Cornerstone Macro, says Treasury yields will rise compared with other sovereign debt, such as German bunds, if investors are reacting to the prospect of a U.S.-specific fiscal collapse.

There are a large number of loans due in 2022 in the United States.

Data displayAt present, most loans do not begin to mature until 2022, and the industry hardest hit right now-- energy-- is only a small part of the market.. However, loan prices could fall sharply before companies run out of cash, hurting investors who hold bonds. As the business of some American companies dries up, they may not be able to keep their existing loans liquid.Junk bond borrowers with the lowest rating of b3 or lower among Moody's Corporation investor service companies had a market share of 38% in July, compared with 22% in 2008.

Bank of America Corporation (Bank of America corp) Strategist "Oleg Melentyev" says investors may be surprised that their loan losses are comparable to their historical losses. He estimates that about 29% of leveraged loans are likely to decline cumulatively in future credit defaults, compared with 20% between 2007 and 2009. To make matters worse, investors may recover even less: about half of the original investment, compared with 58 per cent at the time. High levels of corporate debt are one of the negative consequences of long-term low interest rates.

In the past month, low interest rates have slashed the debt spending of most borrowers. The energy companies hardest hit by the March market turmoil accounted for only 3 per cent of the loan market, according to the standard P Dow Dow Jones Indices. But lower-rated companies are also borrowing more money than ever before, while offering less loan protection or contracts. Some technology companies, which account for 15% of the loan market, are also showing signs of weakness.

The Federal Reserve is blindly "bailing out the market" or is just fuelling long-term risk.

The Fed could buy Treasuries on its own, easing supply pressure on the market, as it did during and after the 2007-09 financial crisis, in what became known as quantitative easing. Between December 2007 and December 2016, the Fed increased its holdings of Treasuries by $1.7 trillion. On Sunday, the Fed said it would buy another $500 billion of Treasuries and $200 billion of mortgage-backed securities. In response, many critics say these plans will inject large amounts of money into the financial system and finance huge government deficits, leading to higher inflation.

In recent years, risky companies have borrowed record amounts of money as investors chase higher yields. Regulators and economists say the market, which survived the 2008 financial crisis, has become overly nervous since then, fearing that the market is too large and risky and could magnify any economic losses caused by the coronavirus crisis. "what I have been worried about is that the existence of over-leveraged companies will exacerbate the economic downturn," Janet Yellen, former Fed chair, said in an interview. "

Since the beginning of 2015, the u.s. credit market has exploded, expanding by nearly 50%, or $400 billion, driven by private equity firms, while smaller but relatively stable listed companies, such as American axis & Manufacturing Holdings, a car supplier, and Atkore International Group Inc., an electrical supplier, also fund share buybacks and acquisitions through leveraged loans.

As a result of regulations passed after 2008, banks that make such loans now rarely hold them. Instead, they sell debt directly to fund managers or repackage it into complex securities to sell to investors around the world. When loan prices fall or default, losses will hit pensions, insurance companies, dozens of mutual funds and hedge funds, some of which react by selling, exacerbating market volatility.

In addition, investors are less willing to buy new loans, and banks that arrange such deals are no longer making new loans. That could be exacerbated by Wall Street's repackaging of many loans into complex securities, causing credit markets to fail and companies that are already heavily indebted without access to new cash.The consequences could be chain-like: a wave of defaults and bankruptcies, forcing layoffs and exacerbating the economic slowdown, whose effects could be long-term.