Jeffrey Gundlach rants about the US deficit, and he is anxious that policymakers are doubling down on policies that will further blow out the public debt.
US national debt has reached a milestone at 28.7 trillion USD, with the debt per citizen is 86,532 USD or a burdensome 228,661 USD on every taxpayer, according to the US debt clock.
“US national debt has reached a milestone at 28.7 trillion USD”
WEALTH TRAINING COMPANY
“The US Government now runs the largest budget deficit as % of GDP in the country’s history. In what is now being defined as “peacetime”. The trade deficit is also expanding aggressively. Inflation is roaring & will not reverse if proposed multi-trillion spending programs pass,” tweeted Jeffrey Gundlack.
The bond king Jeffrey Gundlach rants about the US deficit, and it is no surprise
For those unfamiliar, Jeff Gundlach is the founder of Doubleline, which manages $150 billion of bond investments. His call to fame and fortune has come through making some profitable investments as a bond investor. In the world of fixed income investing, Jeffrey Gundlach earned the nickname “the bond king”. In a few words, when Jeffrey Gundlach talks about bond investing, everyone listens.
The billionaire bond investor with an estimated net worth of $2.2 billion has no doubt got a chunk of his fortune in US treasuries.
“The US Government now runs the largest budget deficit as % of GDP in the country’s history”
JEFFREY GUNDLACK
As stakeholder, it is no surprise that Jeffrey Gundlach rants about the US deficit
Holding a unit of debt that provides income in the form of yields and then guarantees to pay the full amount back on maturity is attractive provided that the issuer, in this case, the US government, remains solvent.
But the Federal Reserve owns the copyrights to the world’s most valuable brand, the USD. In other words, reserve currency status privileges mean the Federal Reserve can always keep creating USD to bankroll the ballooning federal government deficit which then is monetized into treasuries.
“I think perversely, even with the fall in yields, that strength in the dollar could be a bigger factor in driving demand” – Colin Finlayson
What’s more, there is still strong global demand for treasuries which is supporting the US government debt market.
“I think perversely, even with the fall in yields, that strength in the dollar could be a bigger factor in driving demand,” Colin Finlayson, co-manager of the Aegon Strategic Global Bond Fund, said in an interview.
Jeffrey Gundlach rants about the US deficit are timely as politicians in Washington remained divided over whether to suspend the debt ceiling and increase public spending
Biden Democratic administration has passed a bill, September 21 to fund the government through December 3 and suspend the debt ceiling until the end of 2022.
But Republicans in the Senate have vowed to block the bill.
If the Republicans succeed, the Biden administration will need to come up with a new strategy. Alternatively, the government could go into a partial shutdown, unable to pay its bills and risk default for the first time in history.
So, while Jeffrey Gundlach rants about the US deficit, which is already a political hot potato, it also raises other questions. If the largest economy in the world with reserve currency status is struggling to keep the street lights burning, what is happening elsewhere?
