Trump summons Fed’s Powell and tells him he’s wrong with the fee.
US President Donald Trump called Federal Reserve Chairman Jerome Powell on May 29 for his first in-person meeting since taking office in January, telling the central bank chief that he was “mistakes” by not lowering interest rates.
Over the past 12 months, approximately half of all debt in the US bond market has been Treasurys, federal government-issued bonds and memos.
This is according to a June 8 research notes from Toaston Sloak, the chief economist at money manager Apollo.
“This is not healthy,” Throck wrote. “Half of the credit issued in the economy should not go to the government.”
As previously reported by USA Today, the rise in the US budget deficit has attracted the attention of bond market investors. The deficit is the result of income and is largely not keeping up to spending. As it increases, the government issues more debt to close the hole, and as supply rises, the government needs to pay more to attract demand from investors.
According to the non-partisan Congressional Budget Office, President Donald Trump’s proposed tax bill will inflate the deficit by an estimated $2.4 trillion over the next decade, exacerbating its dynamic expansion.
All kinds of credit products, such as mortgages, are associated with the critical US Treasury market, so these high borrowing costs are rippling through the economy.
Sløk previously wrote about concerns about the dynamics of power between governments and bond investors. Some analysts are concerned that investors could become what could even be called “bond vigilantes.” This requires certain financial conditions as a condition for purchasing government debt.
Foreign investors own almost one-third of their outstanding Treasury debt.
Sløk’s June 8 analysis reminds us that the increasing Treasury debt has many ripple effects.
“The result is that investors need to allocate more and more dollars to the government, rather than funding economic growth through lending to businesses and consumers,” Sloak wrote.
