Yesterday’s release of two months of employment data was noisy. The bullish narrative was cancelled out by the bearish narrative and vice versa. As noted several weeks ago it may take until early 2026 to clear the noise from the economic releases.
Markets were quietly volatile on the data closing in the well-defined range.
Worldwide total government debt as of 2024 was around $97.5 trillion according to Bloomberg. The US accounts for almost 40% of this amount. Adding China and Japan into mix, these three countries account for over 60% of government debt outstanding. A major issue at hand the vast majority of this debt will mature in the next several years and interest rates are considerably higher today than when the debt was originated.
Writing the obvious borrowing money around 0% is costless. Borrowing money at 4% as balances continue to rise will cause issues.
The debt will be refinanced but at what price. Rhetorically asking, how much can global central banks control interest rates?
There are two ways to overcome massive debt…restructure or inflate. A strong case can be made the Trump Administration is attempting to inflate as the short-term rate is now around the inflation rate.
If the FOMC acquiesces to the Administration and if inflation remains around current levels, the Administration will be accomplishing its objective…inflating the country out of the fiscal abyss but there will be other ramifications of this policy.
At this juncture, the economy, the Administration, Congress, is perhaps facing the least bad choice.
Enough of the depressing narrative, what will happen today?
Last night the foreign markets were mixed. London was up 1.55%, Paris down 0.25% and Frankfurt down 0.10%. China was up 1.19%, Japan up 0.26% and Hang Seng up 0.92%.
Dow and NASDAQ futures are up 0.25% and .04%, respectively. Oil is advancing modestly on a ban of Venezuelan oil. The 10-year is off 5/32 to yield 4.17%.
