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The debt problem

The Congresional Budget Office published yesterday its projections for the next 10 years for the U.S. economy. The non partisan group, intends to offer a neutral view of what the country’s finances will look like over the next 10 years and beyond. The conclusions of the report point towards an increase in fiscal deficit from $1.6Tn this year to $2.6Tn in 2034. In terms of debt interest cost, its climbing to be the biggest component of the deficit, at 3.1% of gdp for 2025. This is higher than it was during #wwii and, of course, CBO projections do not include any impact for extreme scenarios in its exercise: it’s a neutral, base case scenario without recessions, wars, or similar stress situations. There are only two known ways to reduce debt (other than default): fiscal discipline and financial repression (deflate debt through inflation). Which one do you think is more likely?

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