Lookout! – Deficits, Inflation And QT

Deficits rise, yields fall, defying common expectations. Since 1980, as debt to GDP increases, yields drop, contrary to concerns. Hoisington Investment Management highlights that history shows a paradox: initial deficit-fueled stimulus leads to negative effects on private GDP after a few years. Rising government debt outpaces revenue, requiring lower interest rates to manage costs. This expanding debt is predicted to hinder growth and inflate inflation. While the market fears higher yields from more debt, history suggests otherwise. The Treasury aims to avoid locking in higher rates for longer, acknowledging this trend.