Jim’s Mailbox

Posted at 10:40 AM (CST) by & filed under Jim's Mailbox.

Jim/Bill,

See how an increase in global debt of only 1% on $220trn, an increase of $2.2trn+ is not, or barely being paid for by global gdp growth of 3% (0.03x$75trn=$2.25trn). Hello further erosion of purchasing power because only printing can “save” us – ‘til the card house collapses!

Gijsbert

GOP Tax Plan Could Trigger A Domino Effect That Sends Interest Rates Shooting Higher
September 27, 2017

The Republican tax plan unveiled Wednesday seeks to spark economic growth through lower rates but could punish one key market area: U.S. government bonds.

A key provision of the reform plan calls for the repatriation of cash that multinational companies are holding overseas. While details remain thin, foreign holdings will get softer tax treatment when they are brought home. Companies have about $2.5 trillion stashed abroad.

Treasurys fit into the equation because much of that overseas money is held in cash, cash equivalents or short-term investments — a category that includes government debt.

So, when companies start pulling that money back to the U.S., that presumably would mean selling of Treasurys, a move that would push up yields. Buyers will be needed for those bonds as government debt and deficits increase, which also could see a demand for higher rates.

“A lot of attention is bound to focus on the implications for U.S. equities of the Republicans’ updated tax reform ‘framework,'” John Higgins, chief markets economist at Capital Economics, said in a note.

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