US Government Debt Triggers Concerns Over Long-Term Savings

The US government has a massive debt of around $10 trillion that needs to be refinanced over the next year. This has raised concerns about inflation and the impact on long-term savings. According to some experts, the central bank may prioritize financial stability over price stability, leading to a decrease in the purchasing power of the US dollar.

This scenario is not new; Japan went through something similar between 2012 and 2026. The country's government debt reached nearly 200% of GDP, and instead of defaulting, its central bank expanded monetary policy for over a decade. This led to inflation returning, the yen weakening, and Japanese savers experiencing a total return of around -20% on their government bonds.

Under fiscal dominance, both stocks and bonds lose value due to inflation. Traditional portfolios that hold 60% in stocks and 40% in bonds may no longer be effective as a hedge against market downturns.