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What this means for the value of the Dollar ?
The US federal deficit has ballooned past the $1 trillion mark for the first time and could grow to nearly $2 trillion by the end of the budget year.
Massive government spending to help ease the recession combined with a sharp decline in tax revenues and the cost of the wars in Iraq and Afghanistan have caused the deficit to skyrocket.
The US treasury department said on Monday that the deficit in June totalled $94.3bn, pushing the nine-month total since the budget year started in October to $1.09 trillion.
The Obama administration now forecasts that the deficit for the budget year will reach $1.84 trillion by end September, intensifying fears over interest rates, inflation and the strength of the dollar.
The debt is largely financed by the sale of US treasury bonds and bills and the deficit is making Chinese and other foreign buyers of those instruments nervous about their security.
It could also force the US treasury department to pay higher interest rates to make US debt attractive in the long-run.
“Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run.