Rainer Voss @[email protected] 🇺🇦⚖️

Unfortunately for Americans, there’s not enough US treasuries, so the government has to increase deficit spending to keep the global monetary system from imploding. It’s a modern day Triffin’s Dilemma Treasuries = Collateral There’s so much demand for treasuries there’s a collateral multiplier (how many times is 1 treasury usually rehypothecated) Here’s a study from the Fed in 2018, when deficits were 3.7% of gdp (large so lots of supply of treasuries coming online), and multiplier was still 7-9. Experts I’ve spoken with say they’ve seen 20+ times. So if global economy slows, counter party risk increases, which means demand for collateral increases but willingness to rehypothcate them decreases. The only “solution” is more supply of collateral (Treasuries). Bottom line: US gov will likely have to run higher deficits to support the global monetary system so the risk isn’t that there are too many treasuries but too few.