Manchester City have splashed out £217million in the last couple of months, including the £50million capture of right-back Kyle Walker from Spurs, while Manchester United have brought in £75million Romelu Lukaku and Chelsea swooped for £60million Alvaro Morata.
Levy, quoted in a number of national newspapers while on his club's pre-season tour of the United States, said: "My view is that it's totally unsustainable.
"We've managed the club, we think, in a very appropriate way.
"We have a duty to manage the club appropriately. I don't think that long term for any club it's sustainable to spend more than you earn. You can have periods where you do, but over the long term you can't.
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"I think some of the activity that's going on at the moment is just impossible to be sustainable. If somebody is spending £200million more than they're earning, then eventually it catches up with you. You can't keep doing it."
Spurs have invested more than £100million on their training facilities, and are also expecting to fork out a final figure of around £750million for their new stadium.
Levy acknowledged it was a challenge to finance the building of their new 61,000-seat home, which is due to open in 2018, but insisted it had not affected this summer's transfer dealings.
He added: "We have to find the right balance but I can honestly say it is not impacting us on transfer activity because we are not yet in a place where we have found a player that we want to buy who we cannot afford to buy."
Tottenham remain favourites to sign Ross Barkley this summer, but have drifted from 2/7 to 6/5 in recent days, while PSG's Serge Aurier is 3/1 to join Spurs before the summer is out.
