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The United States Is The Outlier In Funding The Majority Of Its Debt On The Short End

by Fortem Financial October 28, 2024

This phenomenon is undoubtedly a function of what Giscard d’Estaing deemed the “exorbitant privilege” of possessing the world’s reserve currency. Financially speaking, you can get away with murder. More than 54% of America’s debt matures in the next three years. The weighted average cost of our debt is 3.39%, or a level lower than every part of the yield curve.

Without a meaningful decline in interest rates and inflation – or another round of QE – America’s interest expense, already higher than its defense budget, will continue to grow. By our lights, there are only four ways in the modern world to deal with this potentially vicious circle – higher taxes, spending cuts, higher productivity, or simply accepting a higher rate of inflation as a natural consequence of our profligacy.

America stands alone in its ability to create goods that make us all more productive but when those gains may arrive is anyone’s guess. In the short-term, sadly, it would appear that both sides of the political aisle might opt for the political expediency of inflating our way out of our debts. Perhaps only a crisis will change the minds of politicians.

Source: Strategas

 

Market and Index Changes for the Week Ending 10/25/2024

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by Refinitiv.

 

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