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Full Steam Ahead: All Aboard Fiscal Dominance

Lyn Alden · 8 Jan 2025

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The United States is not at risk of a financial crisis caused by the size of its government debt.

Their wordsStabilizing factors such as the global demand for U.S. dollars and debt denominated in its own currency suggest an era of fiscal dominance in the U.S. that's less dramatic than alarmists predict but more persistent and intractable than optimists hope.

Also said by Ben Carlson

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Lyn Alden did not write this page.

Every claim below was made in this piece, quoted word for word and numbered in the order the piece makes them, so you can read it there rather than take our word for it. The sentence above each quote is our reading of the claim, not their wording. Each quote was checked against a stored copy of the page at build time; where the two differ, the quote is the fact.

  1. Our reading

    Structural fiscal deficits have surpassed private sector lending and monetary policy as the primary driver of economic activity and inflation.

    Their wordsStructural fiscal deficits have surpassed private sector lending and monetary policy as the primary drivers of economic activity and inflation, marking a fundamental shift in the economy's liquidity dynamics.

  2. Our reading

    The United States is not at risk of a financial crisis caused by the size of its government debt.

    Their wordsStabilizing factors such as the global demand for U.S. dollars and debt denominated in its own currency suggest an era of fiscal dominance in the U.S. that's less dramatic than alarmists predict but more persistent and intractable than optimists hope.

  3. Our reading

    Raising interest rates cannot meaningfully cool inflation when structural fiscal deficits, not private-sector lending, are its main driver.

    Their wordsSince inflation is not primarily driven by private-sector lending in the current environment, making borrowing more expensive will not significantly cool the economy.

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