Few are combining real rates with fiscal dominance in U.S. economy, Luke Gromen notes - Traders Union
Few are combining real rates with fiscal dominance in U.S. economy, Luke Gromen notes - Traders Union
Source: Traders Union
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DW NOTE
Luke Gromen's observation is not novel—it's just unfashionable. Real rates above zero with a 6%-of-GDP structural deficit mean the Treasury must either cut spending, raise taxes, or print. Congress will do none of the first two. The Fed raised to 3.75% in September while the deficit runs at $1.9 trillion, which makes monetary policy a gesture and fiscal reality the actual regime. The 10-year at 5.24% doesn't tighten conditions when the government is the marginal borrower and has no intention of stopping.