Ah, the illustrious UBS has graced us with a revelation: the US government, burdened by a staggering $36.2 trillion debt, might just have to don its most dramatic mask and resort to some rather theatrical financial measures. 🎭
In a report that reads like a script from a farcical play, UBS suggests that our dear government may need to engage in a bit of financial repression—yes, you heard that right! This involves the art of lowering bond yields as if they were the curtains on a stage. 🎭💰
“We expect that, over the longer term, the US government may pursue both fiscal consolidation and financial repression – a phenomenon that already exists in some form in the US and many other countries – to contain yields and keep the high debt burden manageable.”
One of the more amusing proposals is to reform the supplementary leverage ratio (SLR) for our beloved banks. Because who doesn’t love a good bank reform? 🏦
“Presently, large US banks must hold equity capital against all assets, including high-quality ones like Treasuries. Loosening the SLR could be justified as supporting bank lending, but excluding Treasuries from capital requirements would incentivize banks to hold more Treasuries, potentially enhancing market liquidity.”
UBS, in its infinite wisdom, believes the US is perfectly poised to implement these financial shenanigans—provided they’re temporary, of course. Because nothing says stability like a temporary solution! 😏
“For a country as large and wealthy as the US, widespread financial repression seems feasible and could enable the government to continue financing a growing debt burden without materially increasing its risk of default.”
Financial repression policies could be deployed temporarily to provide fiscal breathing room, allowing for budget consolidation and improvement, followed by a phase-out and a return to more conventional policy settings. In such a scenario, economic distortions should remain temporary and manageable.”
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2025-05-31 15:01