Guns-and-Butter Fiscal Policy Will Keep Rates High

For the first time in nearly 60 years, the US government is attempting to effect fiscal stimulus to both increase social well-being and stave off geopolitical threats. That episode ended in high inflation. This time the guns-and-butter policy is global. And so, it makes sense to think inflation, and therefore interest rates, will remain somewhat elevated. How that will affect asset prices is not yet clear.

I was scrolling through Bloomberg’s website this morning to catch up on the news when I saw a piece that put everything into perspective for me. The headline? Climate change to cause $38 Trillion a year in damages by 2049. Don’t get me wrong; this newsletter article is not going to be about climate change per se. Instead I am thinking about the pressing and sundry reasons that will fuel persistent fiscal deficits globally for years to come.