Monetary Matters with Jack Farley Soaring US Debt Burden & The Global Market Reset | Gerard Minack
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Jun 4, 2025 Gerard Minack, an independent macro analyst at Minack Advisors, dives into the complexities of US debt versus other nations, highlighting why America's situation is particularly precarious. He warns that rising debt levels are on an unsustainable path and that bond vigilantes will likely intervene soon. The discussion also contrasts valuations of US assets with those globally, predicting a convergence, while intriguing insights on Japan's economic resilience and the implications of AI on the market provide a multi-faceted view of current financial landscapes.
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New Era of Higher Interest Rates
- The era of declining interest rates has ended due to higher government deficits and increased demand for investment.
- This new regime will see U.S. Treasury yields settle between 4% to 6%, reflecting a structural shift in real yields.
U.S. Debt Unsustainability Compared to Japan
- U.S. public debt may reach 200% of GDP in 30 years but that trajectory is unsustainable.
- Unlike Japan, the U.S. lacks high net financial assets, extensive debt monetization, and a current account surplus, making high debt levels more burdensome.
Interest Rate Outlook and Growth Scenarios
- Long-term U.S. Treasury yields will range between 4% and 6% reflecting slower population growth and structural investment needs.
- Fed policy response depends on growth: recession leads to cuts; structural slowdown may cause only minimal easing and slightly higher yields.