Paul Tudor Jones reckons slashes in public spending are coming in the first year of a Trump 2.0 administration.
“We are going broke,” said Paul Tudor Jones.
Billionaire hedge fund manager and chief investment officer of Tudor Investment Paul Tudor Jones has been raising the alarms about the US Government’s current fiscal deficit.
“We are going broke”
PAUL TUDOR JONES
Government spending continues to shock. The twilight days of the Biden admin and the relentless debt-fueled spending spree that created an artificial economy rocket-propelled public spending to new records.
In November, the second month of fiscal 2025, the US spent a massive $584.2 billion, a 14% increase from the prior year and a record for the month of November.
But, the bond market and, most importantly, a non-accommodating Fed that refuses to create ever more currency to buy the bonds that investors steer clear from could force the government’s hands to cut public spending.
Paul Tudor Jones reckons slashes in public spending are coming as calamity in the bond market plays out with the Fed remaining passive
This is similar to what happened with UK government bonds in 2022, Gilts as Liz Truss, PM, who holds the record for the shortest unequivocal term of office, at 49 days, resigned. A disastrous mini-budget, which did not have the blessing of the Bank Of England, proposed tax cuts and government spending. Fearing an oversupply of Gilts investors bailed out of the UK government bonds, dragging the GBP to almost parity with the USD.
“In November, the second month of fiscal 2025, the US spent a massive $584.2 billion, a 14% increase from the prior year and a record for the month of November”
THE WEALTH TRAINING COMPANY
The Bank Of England BOE did nothing to alleviate the gilt market crash, which ultimately forced Truss to resign. The new UK PM was forced to scrap the tax cuts, and the BOE got a tighter fiscal policy.
So, it is the unelected central bank heads who decide government spending and fiscal policy, not the government of the day elected by the citizens.
Paul Tudor Jones reckons slashes in public spending are coming because the Fed doesn’t want to risk downgrading the credit rating of treasury bonds and debasing the USD.
“Will we have a Minsky moment where all of a sudden there’s a point of recognition that what they’re talking about is fiscally impossible, financially impossible?” – Paul Tudor Jones
“We are going to be broke quickly unless we get serious about dealing with our spending issues,” said Paul Tudor Jones.
He was worried that government spending could cause a big sell-off in the bond market, spiking interest rates. PTJ does not want to own fixed-income bonds and will be betting against the longer-dated part of the bond market.
“The question is after this election will we have a Minsky moment here in the United States and U.S. debt markets?” Jones said, referring to shorthand for a dramatic decline in asset prices.
“Will we have a Minsky moment where all of a sudden there’s a point of recognition that what they’re talking about is fiscally impossible, financially impossible?” he continued.
So, it is no coincidence that Elon Musk has been appointed head of The Department Of Government Efficiency, which aims to slash 2 trillion dollars from Government spending.
But that is probably exactly what the Fed wants.
