Solving the US debt problem could be bad for Treasuries
It’s a misconception that lower Treasury yields are essential to solving the US debt problem. Admittedly, Treasury yields may fall if, as we saw in the 1990s, the solution mainly involves fiscal consolidation. But Treasury yields may ultimately rise if, as we saw for much of the three decades after WW2, the solution also involves an initial period of yield-compressing financial repression followed by higher inflation. While both outcomes are possible in the years ahead, the risks may titled towards the second solution.
Subscriber content
Read this in full, free
Start a free trial and use one of your 10 free starter credits to unlock this piece.
