Fidelity’s Jurrien Timmer on the simple test for whether debt spirals
The framework Jurrien offers is refreshingly clean. Compare the five year growth rate of nominal GDP, currently somewhere around 6 to 7%, against the cost of funding that debt, with the 10 year treasury at 4.65%. Growth above funding means the situation holds. Reverse the two and debt becomes unsustainable. He uses the comparison to explain other economies, Europe carrying the debt without the growth to service it, and Japan effectively devaluing its way out, with debt to GDP falling even as yields climb. Applied to the US, the entire calculus rests on one assumption, that AI-driven productivity keeps growth running ahead of funding costs.
#Macro #Debt #GDP #AI #Markets
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