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Unusual Whales

Unusual Whales Pod Ep. 30: Fed FOMC Pause Continues, Treasuries, Bonds, National Deficit, and Macroeconomic Outlook

Nov 1, 2023
In this podcast, Joseph Wang and Lyn Alden discuss a range of topics including US Treasuries, Bonds, the national deficit, and the macroeconomic outlook. They delve into the impact of systematic portfolio rebalancing on asset trading and returns, the US inflation rate and the Fed's mandate, and the tug of war between fiscal and monetary factors. The conversation also covers Drucken Miller's views on interest rates, debt-fueled growth and its impact, the impact of reverse repos on financial conditions, and gratitude and perspectives on the macro outlook and trading.
01:31:10

Podcast summary created with Snipd AI

Quick takeaways

  • Fiscal deficits, when funded by issuing debt, can stimulate economic growth and benefit the stock market in the short term, but their long-term impact on inflation and sustainability is a concern.
  • Debt-fueled growth has limitations and risks, including potential constraints on interest rates, overheating, inflation, and the need for productivity-enhancing investments.

Deep dives

The impact of fiscal deficits on the economy

Fiscal deficits driven by massive government spending can be bullish for the economy in the short term, especially when funded by issuing debt. These deficits can stimulate economic growth and benefit the stock market. However, a key concern is the sustainability of such deficits and their impact on inflation. While deficits may be positive in the short term, they can lead to persistent above-target inflation. The effects of fiscal deficits also extend internationally, as the strengthening of real rates and the US dollar can put downward pressure on other countries' economies. Overall, the impact of fiscal deficits is complex and depends on factors such as monetary policy response, interest rates, and other structural dynamics.

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