The US government issued a $ 345 billion deficit in August with $ 344 billion -billions overshadowed by $ 689 billion in spending. The biggest expenses were Medicare for $ 141 billion and social security of $ 134 billion, but what stands out is net interest of $ 93 billion, now the third largest expense. This highlights the growing pressure that rising borrowing costs place in federal economies.
The Federal Reserve is expected to reduce the rates by 25 basic points in September, but the story suggests that it will not be so straight ahead. In September 2024, the FED policy with 100 BPS only relieved to see the yields on the long end move sharply higher. The 30 -year -old Treasury jumped from 3.9%to 5%and today is 4.7%.
With the recent data pointing to an acceleration in inflation, the risk of cutting speeds could burn further price pressure. It would force dividends higher, increase the debt service prices and potentially elaborate on tax hole, creating a challenging background for both decision makers and markets.
The markets respond resolutely. Gold has risen to new record heights, just under $ 3,670 per day. Ounce, which marks one year to date gain of almost 40%. Bitcoin also wins traction and climb over $ 115,000 as investors search for alternatives in an environment where debt -bearing is a greater concern.
