This Is What Financial Repression Looks Like
Authored by GoldFix
GFN - WASHINGTON: President Donald Trump said “certain levels of inflation” can reduce the burden of the national debt “very rapidly,” putting a long-running bond-market concern into unusually direct language.
“Certain levels of inflation will also pay off that debt very rapidly. Very rapidly.”
Pressed on how Washington could bring down the debt burden, Trump added:
“I don’t want to tell you what those means are, but you can pay off the debt through other means.”
For bondholders, the issue is straightforward. Higher inflation reduces the real value of fixed-rate debt if yields do not rise enough to compensate, effectively shifting part of the burden away from the borrower and onto holders of long-duration government bonds.
Trump also criticized the Fed’s rate-setting committee after its unanimous decision last month to raise rates to fight persistent inflation. He called the board “very hostile” while largely sparing Chairman Kevin Warsh, whom he said was constrained by other members of the committee.
Goldman on The Coming Financial Repression
Housekeeping: written in 3 sections this is must read if one is concerned about how the US will manage its growing and unsustainable debt. Founders can access PDF here
The comments come as U.S. debt-service costs remain elevated and long-term yields have risen this year.
The key market signal is the inflation comment itself: the president explicitly described inflation as a way to reduce the real burden of federal debt.
