Ryan Kimmel, Macro Asset Allocation Analyst at DoubleLine Capital, Aug. 22, 2024, discusses with Product Specialist Phil Gioia Mr. Kimmel’s latest research (0:00) on the U.S. deficit and debt spirals. The government’s fiscal position, Mr. Kimmel warns, are on a trajectory to become worrisome for markets, with possible implications including weaker GDP growth, a steeper Treasury yield curve, higher gold prices and a weaker dollar. Their discussion includes: (2:09) the departure of federal deficits from their decades-long, Keynesian behavior of moderating in times of economic growth, with the U.S. now running deficits near 6% of GDP even amid low unemployment and positive growth; (5:28) risky optimism at the Congressional Budget Office with respect to interest rate levels and thus the government’s debt service burden over the next 10 years; (7:01) the danger that deficits, debt loads and interest rate levels have entered “this self-perpetuating negative feedback loop” that while raising the government’s debt burden could crowd out private investment, lowering GDP and thus the economic wherewithal to service that debt; (8:00) the few options left to policymakers to address the deficit and debt spirals, and the absence of serious measures being discussed by Republican and Democratic leaders in this election year; (12:21) possible market implications, including a steeper Treasury yield curve, stronger gold prices and a yen-like decline in the U.S. dollar if the Federal Reserve embarks on a Bank-of-Japan-like course of yield curve control. Mr. Kimmel’s research paper, “Debt Spiral Watch: A Scenario Survey as Washington Drifts Toward a Reckoning,” is available here: https://doubleline.com/wp-content/uploads/Debt-Spiral-Briefing_Kimmel_July-2024.pdf