Unhedged The ‘big beautiful’ budget vs the bond market
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May 27, 2025 The discussion kicks off with President Trump’s 'big beautiful' budget and its implications for deficit spending. Experts analyze how this could shake up the bond market, especially with rising yields and investor anxieties. A lively debate unfolds around the euro's potential rise as an international reserve currency. The hosts inject humor by critiquing the trend of alcohol in bookstores, raising questions about financial sustainability. All this is wrapped in historical parallels to past budget crises, making for an engaging and insightful conversation.
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Markets Like Moderate Deficit Spending
- Deficit spending generally pleases markets by injecting money into the financial system.
- However, excessive deficit may spook bond markets and trigger equity market downturns.
US Debt Hits Historic High
- The bill adds $3.3 trillion to US debt over 10 years, raising debt-to-GDP to about 125%.
- This exceeds post-World War II highs and marks extraordinary debt levels.
Uncertain US Debt Ceiling
- The US debt ceiling is uncertain and can be higher than household debt ratios.
- Unlike individuals, the government can print money and raise taxes to manage debt.