Fiscal Challenges and Treasury Dynamics

This chapter examines the pressing fiscal challenges the U.S. government faces, focusing on soaring deficits and debt sustainability. It discusses the dynamics of the Treasury market, including the effects of long-term versus short-term debt issuance, and the role of hedge funds in enhancing market efficiency through basis trading strategies. The chapter also compares U.S. fiscal management with recent market events in the U.K., raising concerns about investor confidence and market stability.