America cannot bear the honor of the international investor’s confidence

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The writer is founder and CEO of Algebra Investments

In the markets, the most valuable currency is confidence. As investors, we have learned this simple fact over the years, and sometimes in the difficult way. Confidence lies in every number, from profit reports to macroeconomic data. It represents the main bond between investors and investments. When confidence is lost, it takes a long time to rebuild it.

The Trump administration takes over at a time when the investor’s confidence in the United States is high, but it screams. Foreign ownership integrated for US -marketable securities is slightly more than 31 Tongal, which is a certificate of confidence. However, the past three years have witnessed the limits of the system that prevailed after 2008. As such, maintaining strong confidence is very important and difficult at the same time. Catured the customs tariff today Selling market It is evidence of this.

American debt administration was not very difficult. The federal debt, which the public held, reached 100 percent of GDP, the highest level after the war. 36 percent was in 2005. interest costs made up 3.2 percent of GDP, twice the average past decade.

This interest bill is comparable to the levels reached in the mid -1990s, when interest rates were 6 percent. But the administration was running a key surplus at the time, and debt levels were much lower. Even the most conservative expectations expect public debts to rise quickly over the next ten years.

World investors carry an important role in financing this benefit process.

The international property of the US Treasury is located at $ 8.5 trillion, and the total quarter. Dress portfolio flows 90 percent fund of US runway deficit. Both American general obligations and total dependence on the external appetite for American debt leaves.

When it comes to debt accumulation, history rhymes. Regardless of the country’s position or listed time, there is a turning point above that increases the risk of debt. This is especially true when the country, not just the government, is persistent. When the point is reached, confidence can suddenly get lost, with bad repercussions on interest rates and currency.

While expecting the level of precise transformation is impossible, there are ways to alleviate the risks surrounding it.

First, the US Treasury should give the markets a sign of discipline. U.S. spending in the United States failed to normalize post -government, despite healthy economic growth. The basic deficit settled slightly less than 4 percent after 2021, while increasing the burden of social security and little work on the estimated front. The relief interest expenses will not provide because the cost of American debt is less than market prices.

The Trump administration’s extension will be well for the 2017 individual tax discounts for this trend. The Congress Budget Office estimates that it may cost 4.6 trillion missing revenues over 10 years, a number that is difficult to digest for markets.

Second, the US policy should be predictable. Since the opening day, global markets have really been wondering about the country’s plan. The president and his main employees made various data and sometimes contradicting commercial, financial and organizational policy. The markets are lost, as well as the main street. The market weakness after tariff ads is a testimony to that.

Indicators of uncertainty in the United States are close to the high levels at all. Only 2020 was higher. This is not necessary, because the United States is not in the midst of the crisis. The ability to predict is a low suspended fruit that carries high -confidence profits.

Third, international relations must be smoother. The United States is the most powerful country in the world, and the use of leverage to extract concessions from partners is normal. However, the last speech lies behind excessive optimism to benefit from the United States – the world needs America, but not the opposite.

This opinion is only true as much as global investors are ready to finance the growing imbalances. Harsh military and protectionist diplomacy risk partners. This carries a threat to reduce foreign direct investment and the deficiency of marginal buyers of American assets, if not the explicit sale. The opposite of what the United States calls.

For decades, the United States has a stronger currency and less interest rates than its economy justifies, in exchange for providing the world with reliable safe assets.

Economists call this “high concession”. But every privilege requires responsibility. For global capital, the favorite currency is confidence. It is in the interest of America not to allow this currency to be revealed.