US government spending just hit an all-time high as a % of GDP.
Not during wartime. Not during a financial crisis. Right now.
This matters for markets because:
1) Higher government spending = more Treasury issuance = more supply hitting bond markets
2) More debt = higher interest expense = even more borrowing (we're in the doom loop)
3) Crowding out private investment = slower productivity growth = lower real returns long-term
The "deficits don't matter" crowd has been winning the argument for 15 years. But physics eventually catches up. You can't borrow forever without consequences.
Watch the 10-year yield. Watch the dollar. Watch inflation expectations. The market will force discipline long before politicians do.
Not during wartime. Not during a financial crisis. Right now.
This matters for markets because:
1) Higher government spending = more Treasury issuance = more supply hitting bond markets
2) More debt = higher interest expense = even more borrowing (we're in the doom loop)
3) Crowding out private investment = slower productivity growth = lower real returns long-term
The "deficits don't matter" crowd has been winning the argument for 15 years. But physics eventually catches up. You can't borrow forever without consequences.
Watch the 10-year yield. Watch the dollar. Watch inflation expectations. The market will force discipline long before politicians do.