What I Learned This Week

Is the Fed preparing for monetization of U.S. federal debt? What are the investment implications?

As we read the notable shift of FOMC members, from hawkish to dovish, we were reminded of former Fed Chair Bernanke’s November 2002 speech that introduced the term “helicopter money”, which eventually led to QE six years later. Inevitably, there will be another recession or financial crisis. Since the GFC, the U.S. has required about $3 of new nonfinancial debt to support each incremental dollar of GDP. Globally, debt now approximates $244 trillion, or roughly three times global GDP, according to the IIF. And, after global debt grew by $72 trillion over a decade—with populations aging rapidly, middle-class incomes stagnating and global growth decelerating—it is only a matter of time before p…

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