America cannot afford to break global investor trust

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The writer is the founder and chief executive director of algebra investments

The most valuable currency in the market is trust. As investors, we have learned this simple fact over the years, sometimes the hard way. Trust emphasizes every number from earnings reports to macroeconomic data. It represents the main connection between investors and investments. When trust is lost, it takes a long time to rebuild it.

The Trump administration takes on at once when he trusts the investor in the United States, but it’s great, but crunch. Combined foreign property for sale of US securities is more than 31TN, testimony of trust. However, the past three years have seen the borders of the system dominated by me in 2008. As such, it is a priority and difficult to keep trust in the same. Today’s tariff Market sales It’s proof of this.

US debt management has never been so difficult. The federal debt held by the public has reached 100% of GDP, the highest level of post-war level. In 2005, it was 36 percent. Expenditures of interest are 3.2% of GDP in the last decade average.

This interest is comparable to levels reached in the mid-1990s, when interest rates amounted to 6%. But the administration pursued a priority, and the debt level was significantly lower. Even the most conservative forecasts expect that the public debt will rise quickly over the next 10 years.

Global investors play an important role in financing this levers.

International reserves of US treasury securities are $ 8.50, a quarter of the total. The flows of the debt portfolio finances 90% of the current US account deficit. The total liabilities of both public and US are largely dependent on foreign appetite for US debt securities.

When it comes to the construction of the debt, the rhymes of history. Regardless of the position of the country’s position or time history, there is a touch point, as a result of which the risks of debts are growing. This is especially true when the country and not only the government are persistent borrower. When the point reaches, the trust can suddenly lose, unpleasant effects for interest rates and currency.

While predicting the level of opportunity, it is impossible, there are ways to mitigate the risks around it.

First of all, the US treasury should give markets a sign of discipline. The US expenses could not normalize the post-Council, despite healthy economic growth. The primary deficits stabilized in 2021 below 4 percent of 4 percent, growing social security loads and a small action on the discretionary front. Interest costs will not provide relief, as the US debt value is below market pace.

The well-expected extension of the 2017 individual tax cuts by Trump’s administration will be the first real test in this direction. Congress Budget Office Evaluation It can cost $ 4.6TN lost revenue for more than 10 years, a number of difficult to mark markets.

Second, US policy must be predictable. From the day of inauguration, global markets are interested in what the country’s plan is in reality. The President and his main composition made various and sometimes contradictory statements on trade, fiscal and regulatory policy. The markets are lost, and so is the main street. The weakness of the market following tariff statements is evidence of that.

The indicators of policy uncertainty in the United States are close to high levels of all time. It was only 2020. This is inappropriate because the US is not in crisis. Predictability is a low suspension fruit that bears high trust dividend.

Third, international relations should be smoother. The United States is the most powerful nation in the world, and use leverage to make concessions from colleagues is natural. However, the latest rhetoric causes great optimism to the United States. The world needs America, but not the opposite.

This view is only correct, as global investors are ready to finance the growing imbalance in the United States. Angry diplomacy and harsh protection risk foreign partners. This is a threat to reduce foreign direct investment and lack of border buyers for US assets, if not openly selling. On the contrary, what does the United States support?

For decades, the United States has enjoyed a stronger currency and low interest rates than its economy will justify the world with reliable secure assets.

Economists call this “too much privilege”. But every privilege requires responsibility. The currency of choice for global capital is trust. It is the best interest of America to prevent the debit of that currency.