Torsten Slok on U.S. Fiscal Policy and Long-term Interest Rates

Video & Timestamps

On Friday, November 15, Torsten Slok joined Markus’ Academy for a conversation on U.S. Fiscal Policy and Long-term Interest Rates. Torsten Slok is a Partner and the Chief Economist at Apollo.

Watch the full presentation below. You can watch all Markus’ Academy webinars on our Markus’ Academy YouTube Channel.

Timestamps:

[6:38] Overview

[15:02] The fundamentals of the U.S. budget

[24:49] The maturity structure of U.S. debt

[42:58] The ownership structure of U.S. debt

[52:59] No signs of weakness in Treasury auctions

[1:01:42] The term premium, the reserve currency status, and the Fed

Summary

• A summary in three bullets
  • S. fiscal policy is on an unsustainable path. How could this become an issue for financial markets? There are four areas to consider:
  • (1) Rating downgrades based on fundamentals, (2) weakness in treasury actions (of which there is no sign now), (3) the rise of the term premium, and (4) the dollar remaining the global reserve currency
  • The bottom line: a U.S. debt crisis is unlikely. More likely is that we see a gradual upward pressure on long term interest rates
• Click here for the full summary