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Financial stress

The U.S. has a debt problem and a deficit problem. Debt is 123% of gdp, and the deficit is rapidly approaching 7% of gdp. Both ratios slowed down a little bit in prior years thanks to high inflation (financial repression) but due to the Fed restrictive monetary policy, that’s no longer the case and both ratios are increasing again. Congress needs more money to support wars (Ukraine, Houthis, Israel, etc) and social programs (student debt jubilee, etc) and the U.S. Treasury is issuing government debt to finance spending. The chart below shows the increment per maturity bucket. On average, the issuance will grow by 35% vs last year, which was higher than 2018 and prior years. The cost of servicing that debt will also rise. How much can this economy be financially stressed before we enter into irreversible situations?

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