(2025-05-28) Hunt How I Learned To Stop Worrying And Love The Deficit

Ben Hunt: How I Learned to Stop Worrying and Love the Deficit. In narrative-world, the House passage of the Big Beautiful Bill and Elon Musk stepping back from DOGE and the White House have had a clear result: no one believes that this administration has any ability (and probably not any real desire) to control explosive growth in the federal deficit. No one is pretending otherwise any longer, not the White House, not Elon, not Bessent, not House Republicans, not the social media MAGA crew.

The Narrative strategy going forward — such as one exists — is to say that continued and accelerating fiscal deficits are awkshually a good thing, as all this government ‘stimulus’ will keep a recession at bay and prevent the deficit from going totally parabolic. “Run it hot” is the phrase du jour.

This is a Common Knowledge moment for the global financial system — everyone now knows that everyone now knows that the US deficit cannot be controlled, much less reversed, over the remainder of Trump’s term — and it puts us on a pretty straightforward path to a sovereign debt crisis.

The crisis begins as governments like the US (and also Japan, Italy, France and the UK) are forced to issue more and more debt to fewer and fewer voluntary buyers of that debt

the only buyers of long-dated US sovereign debt today (and ditto for the sovereign debt of Japan, Italy, France and the UK) are either forced buyers like life insurers and pension funds or artificial buyers like central banks and quasi-central banks, all of whom can be more or less required by the government to buy and hold (i.e. monetize) the debt.

The crisis emerges as non-forced and non-artificial buyers of that sovereign debt decide that a) they’re not going to buy any new debt offerings, and b) they’re going to sell the sovereign debt they already own before it goes down in value any further

For decades now, US sovereign debt has enjoyed the privilege of being ‘the best house in a bad neighborhood’, so that if you wanted ‘duration’ for whatever reason in your portfolio, you preferred long-dated US Treasuries to any other nation’s sovereign debt, all other things being equal. THAT is the narrative that has been shattered, and it’s at the heart of this emerging sovereign debt crisis.

Scott Bessent and the US Treasury are engaged in a concerted policy effort to create more forced and/or artificial buying of US Treasuries.

But it’s still an emerging crisis. We’re not there yet, and everyone on Wall Street is waiting and watching to see how it develops

Most of these policy initiatives, like a central bank digital currency (CBDC) stablecoin issued by the big banks or the elimination of supplemental leverage ratios on big bank ownership of long-dated Treasuries, are attempts to monetize the debt through the balance sheets of JP Morgan, Bank of America, Citi and Wells Fargo.

We are literally going to do the Weimar thing, but – haha! – no one will be wise to our clever ruse because it will be through our giant, centralized banks rather than the giant central bank.
Now when I say ‘the Weimar thing’, I’m referring to the Weimar Republic of Germany in the early 1920s. The German government owed reparation payments to ...

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