The End Game for The Debt Ceiling
The comments below are an edited and abridged synopsis of an article by Howard Wang
There is considerable political tension and bickering surrounding the US debt ceiling, resembling the dinner-table dynamics of a financially troubled and debt-laden family. Over the past few years, Wang has frequently discussed the escalating US sovereign debt level due to its growing significance in shaping politics, economics and markets. Struggles like the ongoing debt ceiling issue are likely to become a regular part of society.
In this article, Wang provides context regarding the current debt ceiling impasse. He delves into the long-term outlook on US debt, discuss some potential solutions to address this issue, and examines the implications for markets and the economy.
Topics discussed: The near-term effect of the debt ceiling; what is the end game of continuously increasing the debt ceiling; and how the debt should be dealt with.
“Because of my expectation of higher-than-anticipated inflation, I think it is important to hedge against inflation directly through commodities, TIPS (Treasury Inflation-Protected Securities), and a small allocation to gold or cryptocurrencies if you believe in the long-term potential of that asset class. Specifically, switching to TIPS early on is recommended due to its relatively small market size compared to nominal bonds, which I hold a bearish view on in the long term. I believe gone are the days of the traditional 60/40 stock/bond portfolio. You’ll likely need a 60/40 portfolio of stocks and inflation hedge assets.”