I guess you are referring toI don't know if you listened to the Whitney video linked earlier, but she dropped the scary sound-byte that the last deficit was funded with T-bills as demand for higher duration bonds was not sufficient.... IOW, yields would have needed to be higher to attract buyers for longer-term....
I don't have enough data to verify that, but if true, it seems this pattern could eventually lead to all sorts of problems, including even the weakening of the dollar....
I'm sure all this is starting to get dangerously close to what the mods call economic discussion, but suffice it to say that just because the dollar didn't decline during the period of your chart, does not mean that it never will....
Big picture, outside of currency traders, why would we want to expose ourselves to an allocation that is dependent on the dollar needing to stay strong forever....
Why not just go neutral with global market cap and take what the market gives... (whether the dollar strengthens or weakens)
https://mebfaber.com/2024/03/01/whitney-baker-iii/In the 2023 case, there was no duration issued, because the market couldn’t handle it, and so the government issued the deficit entirely in bills. So you’ve got this big increase in essentially transfer income to the private sector that’s been monetized, funded with bills and therefore frees up a lot of money flows to go into assets that have done well on a trailing basis. And so here we are and people are surprised that with this huge fiscal blowout and the monetization of that, the economy’s not really going down.
TBH, no one knows whats going to happen. There may indeed be a problem some time in the future. Congress probably has to fix the underlying issue somehow. How and whether it may go about fixing it is anyone's guess. But a few options are possible
1. It may kick the can down the road
2. It may reduce spending
3. It may increase taxes
4. It may choose to ignore and just let it inflate away.
5. It could choose a combination of any of those things
But for sure the underlying issue could precipitate a crisis of some kind, its all hypothetical. What I have zero confidence is the ex-US stock holding providing any kind of ballast in a crisis situation. If there is a monetary/fiscal crisis in the US, I am overwhelmingly certain that it will be world wide problem for Risk Assets. In that case I would rather have all my net-worth in the US, because there is literally no other country in the world except US that is willing and capable to lead the world out of crisis.
If i really wanted to protect my wealth in non-dollar assets, then i would be looking at something like Euro Inflation Protected Bonds. But I would not be willing to roll the dice on ex-US stocks coming to my rescue especially for something i am going to be counting on as insurance/contingency.
in any case my outlook is function of my own situation as I still have a few more productive earning years ahead of me.
Statistics: Posted by SB1234 — Mon Apr 29, 2024 11:39 pm