”The national debt has reemerged as a major market concern. While the trajectory has appeared unsustainable for quite some time, higher interest rates and a rising interest burden have brought it to the fore, prompting questions of whether it will precipitate a crisis in the medium term. We recognize the risks to the economy and the market but are not alarmists. We believe there are still solutions and time to address the underlying issues surrounding the national debt. We foresee a combination of factors putting the debt on a sustainable path—a mix of productivity growth, moderate inflation, spending cuts, and tax hikes should be enough to avoid a major crisis. Yet it may still require a mini-crisis in the bond markets—similar to the early 1990s in the US or 2022 in the UK—to spur Congress into action. Because the US issues its own currency, it does not face the same budgetary constraints as a household or firm would. However, it is still hemmed in by inflation and potential political repercussions.” Læs hele analysen her.
Morten W. Langer
