Hammer hits nail
"By the end of 2021, $8.5 trillion of US Treasuries will be maturing and, at the current macro conditions, the US government will have no option but to roll over its debt obligations. Consequentially, this will likely cause a shift in the role of monetary policy. Allow us to elaborate. Foreign investors now own the lowest percentage of outstanding US government securities in 20 years. Historically, they funded over 50% of all marketable Treasury securities. Today, that number has dropped to 35%. The Federal Reserve, meanwhile, has increasingly become the buyer of last resort. It now owns a record 22% of all marketable Treasuries. This convergence of ownership is particularly dangerous and appears irreversible. Given the current record government debt to GDP, high unemployment, and large budget deficit, we expect the Fed to monetize the government’s debt burdens at the highest rate ever, from now through 2021. To reiterate our views from prior letters, over-indebtedness and the need for further monetary expansion is a global phenomenon that we believe will lead to the value destruction of all fiat currencies relative to gold, not just the US dollar." |
