We assess the global fiscal deficits and sovereign debt burdens in America, Europe, and many other countries worldwide.

In recent decades, many governments have chosen to run high fiscal deficits on top of sovereign debt mountains so that greater government intervention still plays a vital role in almost all aspects of our economic lives. Global stock and bond markets should show some specific kind of free market resistance to new potential sovereign debt crises in due course.

We describe, discuss, and delve into the global sovereign debt problem in many countries, regions, and jurisdictions worldwide. In recent decades, neoliberalism has driven many governments to run large fiscal deficits on top of sovereign debt mountains since the 1960s. As a result, greater government intervention still plays a vital role in almost all aspects of our modern economic lives these days. Today, many key global stock and bond markets should show some specific sort of free market resistance to new potential sovereign debt crises after the recent rampant Covid pandemic crisis, Global Financial Crisis, Russia’s invasion of Ukraine, and the relentless military conflict between Israel and Iran, Lebanon, Hamas, and the Palestinians in the Middle East.

 

Historically, sovereign debt crises have largely been a persistent problem in poor countries. Today, however, the rich and middle-income countries from America to Europe have fallen into a new dangerous pattern of running large fiscal deficits on top of high sovereign debt burdens. In the rich and middle-income countries, many governments borrow ever more to finance public programs for healthcare, pension, social security, scientific research, tech advancement, and education. For these countries, sovereign debt burdens have already reached vertiginous high levels. In response to this mega trend, global stock and bond markets show some specific sort of free market resistance. Our fair assessment shines light on what might happen over the next couple of decades. In essence, our assessment has profound policy implications for better global stock and bond market niche choices, long-term investment decisions, first-mover competitive advantages, and blue-ocean portfolio strategies.

 

In the vast majority of rich and middle-income countries, sovereign debt as a fraction of annual economic output (total GDP per annum) stands at about 110% to 125% in recent years. Since March 2022, many central banks have chosen to raise interest rates substantially to contain inflation in support of price stability worldwide in the post-pandemic period. Indeed, these interest rate hikes seem to arise partly from public spending sprees in recent years. In effect, this unique fiscal-monetary policy coordination tends to make sovereign debt mountains more burdensome. Today, many rich and middle-income countries spend substantially more on public debt service than they spend on national defense. Also, these governments continue to borrow more in order to fulfill their liberal policy promises. In recent years, fiscal deficits amount to more than 4% of annual GDP in many rich and middle-income countries. Further, fiscal deficits tend to be well more than 6% to 7.5% of annual GDP in America in recent years.

 

In recent decades, several recurrent crises tend to serve as the key fundamental explanations for high fiscal deficits and sovereign debt burdens. These crises span the Global Financial Crisis of 2008-2009, Covid pandemic crisis of 2020-2022, Russia’s gradual and sudden military invasion of Ukraine, and relentless warfare between Israel and Iran, Lebanon, Hamas, and the Palestinians in the Middle East. Specifically, America has spent whatever windfalls the second Trump administration raises from hefty reciprocal tariffs. Also, America further renews and expands tax cuts from the first Trump administration. As a result, these tax cuts exacerbate fiscal deficits and sovereign debt burdens in America. For the foreseeable future, the White House continues to entertain tax credits, state subsidies, and further incentives for the Magnificent 7 and other tech titans to invest in building out AI infrastructure on American homeland.

 

In recent years, France goes through annual political crises as new proposals for greater fiscal discipline inevitably result in populist blowbacks and backlashes. These proposals serve as the main reason for France to lose 5 prime ministers in only a few years. The same fiscal situation seems to pervade several other European countries too. Specifically, fiscal deficits represent about 3.5% to 8% of annual GDP in Finland, Hungary, and Romania, and public debt burdens amount to about 115% to 150% of annual GDP in Belgium, Italy, Greece, and Spain etc. In Japan, the new prime minister favors expansionary fiscal-monetary policy coordination despite sky-high sovereign debt mountains. In recent years, the Japanese government continues to run fiscal deficits at more than 6% of annual GDP, and the Japanese government maintains sovereign debt burdens at 230% to 260% of annual GDP. From South Korea, Taiwan, and the Philippines to Vietnam, Thailand, and Malaysia, several other East Asian countries face the same fiscal situation, but their sovereign debt burdens remain well below 90% of annual GDP.

 

Global stock and bond market investors now demand higher long-term returns because these investors sense danger amid the current fiscal situation in many rich and middle-income countries. Specifically, the 10-year U.S. Treasury bond yields hover around 4.3% to 4.5% and are hence substantially more than their counterparts about one decade ago. Today, many stock market investors further expect to receive higher average returns of about 6% to 13% amid the current China-U.S. global race toward artificial general intelligence (AGI). In combination, U.S. Treasury bond default, inflation, subpar economic growth, and geopolitical risks, threats, and tensions continue to haunt many global stock and bond market investors, businesses, and consumers worldwide. In response, these stock and bond market investors expect to receive higher average returns on their strategic global investment choices in due course.

 

In recent years, America has run up its sovereign debt worth more than 95% of annual GDP. At the same time, America continues to run enormous fiscal deficits worth 6% to 8% of annual GDP. Some recent empirical studies by Harvard macro economists Ken Rogoff and Carmen Reinhart show a robust negative relation between sovereign-debt-to-GDP ratios and economic growth rates when sovereign debt exceeds 90% of annual GDP. After all, the current American fiscal strains may or may not be sustainable in the long run. The new classic Sargent-Wallace monetarist arithmetic analysis suggests that higher inflation inevitably arises from incremental increases in money supply growth when the central bank continues to fund fiscal expenditures with Treasury bonds as part of the macro budget constraint. In the extreme, if high public-sector debt eventually cripples sovereign creditworthiness and subsequent credible fiscal policy actions, the resultant public debt burden would likely lead to substantially higher inflation through domestic exchange rate depreciation. In the worst-case scenario, the central bank cannot maintain better price stability as part of the macro mandate. If the incumbent government has no or little fiscal discipline, blind, reckless, and incessant expansionary fiscal policy actions often turn out to be unsustainable in the long run. The hefty sovereign debt burden inexorably derails the core trade-offs between economic growth, inflation, and macro-financial stress conditions.

 

Despite the global fiscal deficit dilemma, ironically, many rich and middle-income economies continue to experience benign macro-financial stress conditions in recent years. No major economy enters a recession. Also, sovereign debt burdens have fallen slightly in real terms due to global inflationary pressures since their Covid pandemic peak. Although many central banks have chosen to launch interest rate hikes in response to these global inflationary pressures, most real interest rates remain well below economic growth rates in the vast majority of both rich and middle-income countries around the world. If the primary macro budget continues to be in balance with reasonable interest service costs, annual GDP would likely continue to rise faster than sovereign debt does in real terms. With 5-year U.S. Treasury bond yields, sovereign debt service costs, and economic growth forecasts, we can further gauge whether most governments would be able to sustain the current fiscal situation in these rich and middle-income countries worldwide. In our fair assessment, most of these governments would likely be able to run small fiscal deficits, even though these governments had to refinance almost all of their sovereign debt burdens immediately at the respective interest rates today. Among the G7 countries, however, only Canada enjoys low sovereign debt-to-GDP ratios in recent years. From America, Britain, and France to Japan, Italy, and Germany, the current fiscal deficit dilemma remains dire as the sovereign debt burden may result in negative ripple effects on economic growth, inflation, domestic employment, and even AI-driven tech advancement. In practice, this global fiscal situation looks even worse when we consider the next-gen wave of government spending sprees for longer lifespan, national defense, and the recent climate transition. In the next few years, about a quarter of American public debt would become due. Should the U.S. government choose to reissue such public debt at the current Treasury bond yields, this fiscal adjustment would likely raise Treasury debt service costs and interest payments to more than 5% of annual GDP. Indeed, some recent IMF studies highlight the same fiscal deficit dilemma outside North America. Specifically, sovereign debt interest service costs would amount to more than 6% to 8% of annual GDP in Britain, Spain, Portugal, and even Switzerland over the next couple of decades. As the Penn Wharton macro budget model suggests in recent times, the U.S. government would need to raise taxes with lower fiscal expenditures, both by 15% at the bare minimum, in order to alleviate the future gap between American taxes and public expenditures in the next 20 years.

 

As many Americans continue to extend both their longer lifespan and healthspan, government spending sprees would likely further boost social welfare transfers to senior citizens through better and broader healthcare and pension programs. These social welfare expenditures have increasingly become bigger portions of both U.S. fiscal deficits and sovereign debt burdens in recent years.

Since the 1980s, social welfare transfers to senior citizens span both healthcare and pension programs and have grown by 5% of annual GDP in the OECD group of rich countries. Over the same time frame, these recent growth figures for both healthcare and pension programs combine to be twice the recent rise in all of the other government expenditures for the broader social safety net. More broadly, the G20 governments would likely spend another 2.5% to 3% of annual GDP on both healthcare and pension programs by 2035. Since many OECD governments launched the post-war foundation of the social welfare state, its critics warned that political coalitions would likely capture-and-abuse the social welfare state to the detriment of many middle-class families worldwide.

 

Some regard this new transfer of fiscal resources as inevitable. After all, the social welfare state serves only as a veil. Some specific policy choices cannot change the fact that the social welfare state has to support the elderly through both healthcare and pension programs as the key ratio of retirees-to-workers rises over time. In a fundamental view, many macro economists have begun to entertain the idea that the global ageing population need not be another major economic drag on the fiscal budget. Today, many old people work more and more productively as they live longer and hoard more wealth over several recent decades. Even as many G20 economies tend to have aged significantly in recent decades, employment has risen slightly since 2000 as a share of total population. As life expectancy at birth has grown from 78 years to 83 years, the median effective working life has gone up from 34 years to almost 40 years. For this reason, many ageing economies have wound up with more workers for every dependent in recent years.

 

Today, old people tend to be more productive in the workplace. A person who is 70 years old today has the cognitive capabilities of a 53-year-old back in 2000. Among the vast majority of senior citizens over the age of 50, these cognitive improvements have grown so substantially that they often translate into a hefty 35% increase in the average income of the typical senior citizen with a job. Globally, this demographic trend toward longer healthspan is sufficient to add another 2 to 3 percentage points to annual global growth in both economic output and labor productivity over the next few decades.

 

Longer longevity helps with the global fall in fertility. In recent years, the average fertility rate for births needs to be more than 2 children per woman to keep up with deaths in most rich and middle-income countries, regions, and jurisdictions worldwide. If life expectancy rises at a pace of 3 months per year in accordance with what modern human history shows, the replacement fertility rate would likely decrease to fewer than 2 children per woman, specifically only 1.5 to 1.7 children per woman, in these rich and middle-income parts of the world. On balance, many rich and middle-income countries would have seen their populations grow steadily in recent decades even if there had been no immigration at all for the foreseeable future.

 

In terms of this demographic structural shift, the older global population should mean lower real interest rates today in stark contrast to substantially higher real interest rates well before the mid-1980s. Senior citizens tend to have built up their strategic assets and passive income streams during their working lives. When these senior citizens start to lead a quiet life upon retirement, they slowly run down these strategic assets and passive income streams. In effect, the vastly greater stock and bond investment portfolios provide a plentiful supply of capital worldwide. As a result, the global ageing population might have helped reduce real interest rates from double digits back in the 1980s to low-to-mid single digits slightly above the zero lower bound today. Over the next few decades, we would witness that the same demographic structural shift continues to drive down global real interest rates by another one percentage point ceteris paribus. Over the same time frame, the fiscal impact of lower real interest rates from the American ageing population could boost the U.S. sovereign-debt-to-GDP ratio to reach 210% to 250%. In time, senior citizens retain political power. By voting with both their feet and voices, these senior citizens can resist almost all kinds of structural changes to the current social welfare state. At the same time, senior citizens continue to enjoy the first-mover advantages of social welfare transfers through both broader healthcare and pension programs worldwide. As old age becomes shorter and grimmer, these senior citizens retain their social welfare transfers, benefits, and almost all other aspects of the broader social safety net in America. At their inception, public pensions in Britain, France, and Germany provided only meager support to the senior citizens over the age of 70 when life expectancy was about 45 to 50 years old. As life expectancy shot up, however, these public pensions failed to keep pace as these western governments chose to raise the respective retirement ages slightly at the margin. Back in the 1970s, the typical person would spend about 16% of his or her life in retirement. By comparison, today the typical person would spend almost 25% of his or her life in retirement. Over recent decades, many governments from America to Europe have made efforts to raise the respective retirement ages from 62-65 to about 70 years old in line with the recent rises in both human healthspan and longevity worldwide. In recent years, there are many more pensioners worldwide who both claim their state annuities and vote to preserve these economic interests from the social welfare state.

 

In light of this global demographic structural shift, several recent IMF studies shine new light on the fiscal balance between social welfare transfers for senior citizens and sovereign debt burdens worldwide. When the IMF macro economists analyze the policy manifestos of the incumbent political parties in 65 countries, this analysis highlights a key empirical fact: both left-wing and right-wing parties have become substantially more expansionary in their economic policy promises since the 1960s. In the broader context of greater government intervention in economic policy development, we should reinterpret the recent structural shifts in this political rhetoric toward both neoliberalism and expansionism. In time, this greater government intervention helps protect many global market investors, businesses, and consumers worldwide. In essence, these recent structural shifts often tend to result in higher fiscal deficits and sovereign debt burdens in the vast majority of rich and middle countries, regions, and jurisdictions around the world.

 

Today, many western governments seek to substantially boost economic growth with a series of tax cuts, greater incentives for AI-driven tech advances, and fewer restrictive laws, rules, and regulations for immigrants worldwide. However, these rich and middle-income countries have rarely repaid their sovereign debt burdens with higher fiscal surpluses, economic growth rates, and productivity gains since the Second World War.

From the 1950s to the 1970s, several fundamental factors combined to cause higher economic growth worldwide. Many wartorn economies caught up, and both higher labor productivity gains and output growth rates arose from the major baby boom, mandatory middle-school education, and greater female participation in the modern workforce. These economies seemed to be able to pay off their sovereign debt burdens with catch-up windfalls from greater economic growth and labor productivity worldwide. Today, however, many economies have already picked the low-hanging fruit. In many rich and middle-income countries, both left-wing and right-wing politicians still pin hopes on higher economic growth to shore up public finances in the common form of both greater fiscal deficits and sovereign debt burdens. The left tends to favor more immigration as a natural response to the problem of a global ageing society. Also, the right tends to focus on greater labor productivity gains as a result of tax cuts, lax regulations, and new AI-driven tech advances. In combination, foreign knowledge workers, experts, and other specialists tend to serve as one of the major partial solutions to the demographic drag dilemma. Technically, this immigration boosts domestic consumption, investment, and total economic output. Many western governments that welcome high-skill immigration can spread both fiscal deficits and sovereign debt burdens over more people. For the foreseeable future, fiscal deficits would decline on balance because income tax receipts rise due to the healthy inflows of foreign workers. More immigrants further serve as more retail consumers, and these new retail consumers look better fiscally than more babies who are not yet ready to work full-time with taxable income streams.

 

In recent decades, the baby boomers have gone from being budget boons to budget busters. Life expectancy has risen and further adds immigrants to the domestic population. In combination, these fundamental factors cannot prevent the average age of the population from going up in tandem with life expectancy. Eventually, many governments would likely face the same fiscal situation again on a bigger scale as the young get old. Further, immigration can cause negative ripple effects outside the global stock and bond markets in terms of residential real estate affordability. Some recent studies show that a one-percentage-point increase in H-1B high-skill foreign population produces a 6% to 8% increase in average house prices in many metropolitan areas in America ceteris paribus.

 

For the social welfare state, progressive taxation translates into a fiscal chasm between the lifetime income tax receipts of high-skill versus low-skill workers. High-skill workers include doctors, lawyers, fund managers, software developers, engineers, and even AI-driven machine-learning practitioners. Low-skill workers include cooks, cleaners, cashiers, construction workers, janitors, and agricultural laborers with little to no formal educational attainment. Specifically, the average migrant who arrives in America with some graduate degree between the ages 25 and 35 brings total lifetime income tax receipts of almost $2.3 million in present value terms. By comparison, the average migrant who arrives in America with no high-school diploma brings in lifetime income tax benefits of less than $15,000 in present value terms. As the Penn Wharton government budget model suggests, it would take another implausible 71 million high-skill migrants to close the fiscal gap of $163 trillion over the next couple of decades. For this reason, immigration cannot serve as the complete solution to both the current fiscal problem and the demographic drag in America.

 

Many macro economists and other optimists believe AI-driven tech advances may solve both the current fiscal problem and the demographic drag in America. The U.S. Congressional Budget Office (CBO) empirically finds that the public-debt-to-GDP ratio would decrease dramatically from more than 155% to 115% ceteris paribus if AI-driven tech advances help boost labor productivity growth by only half a percentage point over the next couple of decades. In addition, faster economic growth and higher labor productivity would further prompt additional capital investments from many global stock and bond market investors. In turn, these new capital investments would put upward pressure on real interest rates in many rich and middle-income countries, regions, and jurisdictions worldwide. In this virtuous cycle, AI-driven tech advances can probably help connect the dots between American economic growth and sovereign debt sustainability in the long run.

 

Today, many macro-financial economists now expect AI-driven tech advances to turbocharge labor productivity for the benefits of almost all residents in America. As the Magnificent 7 tech titans, cloud hyperscalers, microchip manufacturers, and software service providers continue to produce hefty, robust, and stable sales, profits, and cash flows worldwide in the current global race toward artificial general intelligence (AGI), we would probably expect to see greater strategic interdependence across the global AI value chain. In turn, this greater strategic interdependence manifests in at least some of the circularity in the recent flagship AI capital investments between OpenAI, Nvidia, AMD, Broadcom, Qualcomm, Oracle, and Cisco etc. In the best likelihood of success, we would expect the American AI tech titans to extract at least $8 trillion to even $12 trillion out of the $20 trillion total economic value of AGI in the next couple of decades. From this new normal perspective, AI ecosystem circularity is less as artificial inflation and substantially more as a key reflection of strategic interdependence between these core AI partners across both best-in-class hardware and software requirements. For these reasons, the current AI-driven stock market rally is not fundamentally a hope-and-hype asset bubble like the past Internet dotcom era.

 

In recent years, many governments seek to substantially boost economic growth and labor productivity with a series of tax cuts, greater incentives for AI-driven tech advances, and fewer restrictive laws, rules, and regulations for immigrants worldwide. However, the rich and middle-income countries have rarely repaid their sovereign debt burdens with higher fiscal surpluses, economic growth rates, and productivity gains since the Second World War. To the extent that AI-driven tech advances attract new capital investments worldwide, cross-border capital flows can continue to secure relatively high correlations between low-to-mid single-digit real interest rates in many countries, regions, and jurisdictions around the world. As several hints of greater strategic interdependence manifest in the global AI value chain, we would expect global stock market investors to require higher average returns on the current massive AI infrastructure buildout both in America and elsewhere. At any rate, our fair assessment has to strike a delicate balance between both the bright and dark sides of AI-driven economic growth and labor productivity. Whether the next-gen AI tech advances can help solve the current fiscal problem remains an open controversy.

 

In recent years, several states seek to reduce their government spending sprees to better balance the current fiscal situation. In combination, U.S. Treasury bond default, inflation, subpar economic growth, and new geopolitical risks, threats, and tensions continue to haunt many global stock and bond market investors, businesses, and consumers worldwide.

In his new book, How Countries Go Broke, the Bridgewater hedge fund founder Ray Dalio suggests that there is a clear conventional sovereign debt supercycle across many different countries in long-term human history. For better defense, national security, economic development, and even technological advancement, governments first lever up with hefty fiscal deficits and sovereign debt burdens for several decades. At a subsequent stage, these governments often need to clear away the fiscal problem through Treasury bond default, inflation, or both. From Europe to North America, even the richest countries are not fully immune to this clear conventional sovereign debt supercycle.

 

However, a significant minority of the rich world seems to have opted out of this sovereign debt supercycle in recent years. Today, many economies that account for one third of rich-world output at purchasing-power parity have net sovereign debt burdens of less than 50% of annual GDP there. These economies span the 3 major trade zones. Indeed, these economies stand out for their relative probity: the junior Anglosphere of Canada, Australia, and New Zealand; the triple trade Rhineland of Germany, Switzerland, and the Netherlands; and the East Asian tiger trade bloc of Hong Kong, South Korea, Taiwan, Singapore, and Malaysia. Indeed, it is possible for western governments to opt out of the clear conventional sovereign debt supercycle worldwide.

 

Some recent studies further show that a political system with substantially more fragmentation is more likely to run up sovereign debt burdens via long prevalent fiscal deficits. The logic is simple. If a political system comprises many different special interest groups, the whole country would have to bear the brunt of both hefty fiscal deficits and sovereign debt burdens as these interest groups continue to lobby for goodies from year to year. In this key tragedy of the common results, almost all citizens share the inevitable costs of interest group politics. Specifically, several coalition governments and alternative political systems for proportional representation are prone to throwing caution to the wind to keep everyone happy. In many western countries, the governments have established sound, robust, and efficient systems for pension prepayments such that these countries would not need to rely on future governments to fulfill their pension promises in due course. These countries include Australia, Canada, Denmark, Iceland, the Netherlands, Sweden, and Switzerland. Among the rich countries, only America retains both vast pension assets and high sovereign debt burdens.

 

With no laws against sovereign debt accumulation, majoritarian political systems are ever more vulnerable to many fiscal problems. Political polarization often tends to be the key fundamental reason for the new normal steady state of sovereign debt accumulation. As some public finance practitioners suggest, political polarization often serves as the means by which governments can sabotage their opponents. In this fiscal situation, both sides continue to engage in a unique war of attrition in the sense that both sides would rather delay fiscal austerity instead of tightening the belt today. In America, both Republicans and Democrats know almost all kinds of tax cuts and fiscal transfers would shift the baseline for future negotiations over any eventual fiscal compromise.

 

In response, some lawmakers call for constitutional reforms to impose hard limits on the fiscal balance for sovereign debt accumulation under such circumstances. These hard constitutional limits can perhaps provide stronger protection against profligacy. However, these hard constitutional limits may inevitably further reduce fiscal flexibility in future negotiations. If some specific fiscal rules are so tight that they prevent the country from harnessing the key advantages of sovereign debt accumulation, these fiscal rules can combine to be both a help and a hindrance. In the broader context of the Dalio clear conventional sovereign debt supercycle, many macro-financial economists believe any potential delays in the proper fiscal adjustments would further expand their eventual scale in due course. As a result, the proper scope of the political deal that needs to be struck to avoid future fiscal catastrophe should broaden over time.

 

In his recent book on sovereign debt-driven fiscal strains, Doom: The Politics of Catastrophe, Sir Niall Ferguson describes the historically common pervasive tendency of former empires, or global superpowers, to gradually then suddenly decline due to excessive sovereign debt accumulation. At some inflection point, the sovereign debt service costs, mainly interest and principal payments on Treasury bonds, started to exceed national defense expenditures for each of the former empires. As a result, each of these former empires faced fiscal strains to engage in an arms race against another superpower. In this broader context, each of these former empires ultimately declined due to some subsequent war, conflict, confrontation, or military challenge from another superpower.

 

Sir Niall Ferguson refers to this historically common tendency as Ferguson’s Law. He uses, applies, and leverages Ferguson’s Law to shine new skeptical light on the fiscal implications of the second Trump administration’s One Big Beautiful Bill Act. As Ferguson’s Law shows, the current American sovereign debt service costs, primarily interest and principal payments on Treasury bonds, have begun to exceed American national defense expenditures. For this reason, the current American fiscal situation today may or may not be sustainable in the long run. In addition to the Russia-Ukraine war in Eastern Europe as well as the relentless military warfare, conflict, and retaliation between Israel and Iran, Lebanon, Hamas, and the Palestinians in the Middle East, another new military conflict, confrontation, or challenge from some superpowers, such as China and North Korea, might weaken the extant American balance of power in many different parts and regions of the world. In recent years, the major flashpoints pertain to Mainland China’s potential aggression against Taiwan and the Pacific first island chain and North Korea’s potential invasion over the Korean Peninsula.

 

Ferguson draws historical analogies to support his key mainstream thesis of geopolitical decline. Specifically, Ferguson’s Law broadly applies to the Spanish Empire in decline from 1590 to 1652; the Dutch Republic in decline from 1705 to 1795; the French Empire in decline from 1756 to 1789; the Ottoman Empire in decline from 1828 to the early-1900s; the Austro-Hungarian Empire in decline from 1867 to 1918; and the British Empire in decline from the 1930s to 1960s. Ferguson further contends that America is now at a similar historical juncture. Although Ferguson’s Law is not formal in the scientific sense, this concept provides a rich geopolitical framework for us to better understand the cyclical nature of each former empire. Ferguson’s Law further highlights the potential pitfalls of excessive sovereign debt accumulation, as well as the fiscal policy implications for better defense and national security on the global stage.

 

We believe higher taxation, Treasury bond default, and inflation would continue to haunt many stock market investors, businesses, and consumers worldwide. As the U.S. Treasury bond interest and principal payments exceed the U.S. defense expenditures, the current path toward greater sovereign debt accumulation may not be sustainable in the long run.

Through our chosen unique process of elimination, we have narrowed down the next-gen possibilities of sovereign debt accumulation in America and elsewhere in recent decades. In the next few years, it would not be likely for the U.S. government to cut public finances, especially both the healthcare and pension programs for the old citizens who can often vote with their feet and voices to further preserve these economic interests for the foreseeable future. Also, the massive inflows of high-skill migrants would not fully solve the current fiscal problem and the demographic drag in America. Even the next-gen AI-driven technological advancement would not boost both economic growth and labor productivity so much that new economic output can help pay off public debt service interest and principal payments in America. At any rate, global stock and bond market investors often tend to require higher long-term average returns on their AI-driven investment choices in the broader context of both low real interest rates and small fiscal deficits over the next couple of decades. At any rate, we believe higher taxation, Treasury bond default, and inflation would continue to haunt many stock market investors, businesses, and consumers worldwide. As the U.S. Treasury bond interest and principal payments now exceed the U.S. defense expenditures, the current path toward greater sovereign debt accumulation may not be sustainable in the long run.

 

In some countries, regions, and jurisdictions worldwide, we would witness higher taxation on income, wealth, and even capital. In the meantime, however, America has a relatively low tax burden by global standards. Also, we would not expect to see new taxes on income, wealth, and capital insofar as the Republican Party continues to serve as the incumbent government in America. In practice, the next global financial crisis might further exacerbate the joint fiscal impact of all kinds of tax cuts, credits, state subsidies, and other incentives for global market investors to bet on the current AI infrastructure buildout on American homeland. In many rich and middle-income countries, Treasury bondholders may face both higher inflation and even Treasury debt default in the worst-case scenario. When most people expect prices to rise for the foreseeable future, the Treasury bondholders tend to demand higher yields at the outset. Today, capital is globally mobile. It is hence hard for us to imagine again the smooth and robust postwar resolution of sovereign debt accumulation for America.

 

Many governments retain the policy tools to inflate away recurrent fiscal deficits and sovereign debt burdens. Since the Global Financial Crisis of 2008-2009 and Covid pandemic crisis of 2020-2022, some central banks have chosen to use large-scale asset purchases (LSAP) of both Treasury bonds and mortgage securities to create new money reserves with some marginal interest costs as real interest rates hover near the zero lower bound. As these central banks buy both Treasury bonds and mortgage securities and keep real interest rates near the zero lower bound, these central banks can control the sovereign debt service costs in the common form of low interest and principal payments. In combination, these central banks can cause sovereign debt to shrink in real terms when the various real interest rates remain below the respective inflation rates worldwide. As a result, this fiscal-monetary policy coordination would be suboptimal because central banks would then lose their precious monetary policy independence in driving the respective home economies toward the dual mandate of both better price stability and maximum employment. After all, it is not an easy task for both central banks and treasury departments to clear the current fiscal mess. In time, central banks learn to weigh the monetary policy trade-offs between output and inflation expectations and macro-financial stress conditions. In many countries, regions, and jurisdictions worldwide, the respective treasury departments would still need to apply fiscal prudence in special interest group politics in due course.

 

Today, the European Central Bank (ECB) cannot continue to finance European governments and their respective public policy programs by treaty. However, the ECB already half-underwrites EU government debt burdens. In the Covid pandemic crisis of 2020-2022, the ECB tilted its large-scale asset purchases (LSAP) of sovereign debt instruments toward Portugal, Italy, Greece, and Spain (PIGS). With negative interest rates and other unconventional monetary policy tools, the ECB invented new ways to keep real interest rates near or below the zero lower bound. If the ECB had to choose between tolerating an inflation surge and letting a major economy leave the Eurozone in another sovereign debt crisis, the ECB would almost always save the single currency in the broader trade bloc. Even though the ECB might seek to accomplish whatever it takes to protect the macro mandate of price stability, the single currency would likely trump the core inflation target in the worst-case scenario. With large-scale asset purchases of sovereign debt instruments, the ECB would follow the Federal Reserve System to create more money to revive economic growth and labor productivity, even if this unconventional monetary policy stance would risk driving up higher inflation and money supply growth at the expense of retail consumers in Europe.

 

Despite the global fiscal deficit dilemma, ironically, many rich and middle-income economies continue to experience benign macro-financial stress conditions in recent years. No major economy enters a recession. Also, sovereign debt burdens have fallen slightly in real terms due to global inflationary pressures since their Covid pandemic peak. Although many central banks have chosen to launch interest rate hikes in response to these global inflationary pressures, most real interest rates remain well below economic growth rates in the vast majority of both rich and middle-income countries around the world. If the primary macro budget continues to be in balance with reasonable interest service costs, annual GDP would likely continue to rise faster than sovereign debt does in real terms. With 5-year U.S. Treasury bond yields, sovereign debt service costs, and economic growth forecasts, we can further gauge whether most governments would be able to sustain the current fiscal situation in these rich and middle-income countries worldwide. In our fair assessment, most of these governments would likely be able to run small fiscal deficits, even though these governments had to refinance almost all of their sovereign debt burdens immediately at the respective interest rates today. Among the G7 countries, however, only Canada enjoys low sovereign debt-to-GDP ratios in recent years. From America, Britain, and France to Japan, Italy, and Germany, the current fiscal deficit dilemma remains dire as the sovereign debt burden may result in negative ripple effects on economic growth, inflation, domestic employment, and even AI-driven tech advancement. In practice, this global fiscal situation looks even worse when we consider the next-gen wave of government spending sprees for longer lifespan, national defense, and the recent climate transition. In the next few years, about a quarter of American public debt would become due. Should the U.S. government choose to reissue such public debt at the current Treasury bond yields, this fiscal adjustment would likely raise Treasury debt service costs and interest payments to more than 5% of annual GDP. Indeed, some recent IMF studies highlight the same fiscal deficit dilemma outside North America. Specifically, sovereign debt interest service costs would amount to more than 6% to 8% of annual GDP in Britain, Spain, Portugal, and even Switzerland over the next couple of decades. As the Penn Wharton macro budget model suggests in recent times, the U.S. government would need to raise taxes with lower fiscal expenditures, both by 15% at the bare minimum, in order to alleviate the future gap between American taxes and public expenditures in the next 20 years.

 

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Through our proprietary alpha stock signals and personal finance tools, we can help stock market investors achieve their near-term and longer-term financial goals. High-quality stock market investment decisions can help investors attain the near-term goals of buying a smartphone, a car, a house, good health care, and many more. Also, these high-quality stock market investment decisions can further help investors attain the longer-term goals of saving for travel, passive income, retirement, self-employment, and college education for children. Our AYA fintech network platform empowers stock market investors through better social integration, education, and technology.

 

Andy Yeh

Online brief biography of Andy Yeh

https://ayafintech.network/blog/a-brief-biography-of-andy-yeh/

Co-Chair

AYA fintech network platform

Brass Ring International Density Enterprise ©

 

 

We assess the current global race toward artificial general intelligence (AGI) between both the U.S. and China.

Podcast: https://bit.ly/4cGMCgi

Article: https://ayafintech.network/blog/we-assess-the-current-global-race-toward-artificial-general-intelligence-agi-between-both-china-and-america/

 

The current AI-driven stock market rally may not be a major asset bubble yet in global human history.

Podcast: https://bit.ly/46LY46t

Article: https://ayafintech.network/blog/the-current-ai-driven-stock-market-rally-may-not-be-an-asset-bubble-yet/

 

President Trump refreshes American fiscal fears and sovereign debt concerns through the One Big Beautiful Bill Act.

Podcast: https://bit.ly/4eSEU1w

Article: https://ayafintech.network/blog/president-trump-refreshes-american-fiscal-fears-and-sovereign-debt-concerns-through-the-one-big-beautiful-bill-act/

 

President Trump poses new threats to Fed Chair monetary policy independence again.

Podcast: https://bit.ly/4ebeoQH

Article: https://ayafintech.network/blog/president-trump-poses-new-threats-to-fed-chair-monetary-policy-independence-again/

 

What are the mainstream legal origins of President Trump’s tariff policies?

Podcast: https://bit.ly/3ZnNMG7

Article: https://ayafintech.network/blog/mainstream-legal-origins-of-recent-trump-tariffs/

 

American exceptionalism often turns out to be the heuristic rule of thumb for better economic growth, low and stable inflation, full employment, and macro-financial stability.

Podcast: https://bit.ly/4iuWuJ9

Article: https://ayafintech.network/blog/american-exceptionalism-turns-out-to-be-the-heuristic-rule-of-thumb-for-better-economic-growth-low-stable-inflation-full-employment-macro-financial-stability/

 

In the broader modern monetary policy context, central banks learn to weigh the trade-offs between output and inflation expectations and macro-financial stress conditions.

Podcast: https://bit.ly/42SwrXG

Article: https://ayafintech.network/blog/central-banks-weigh-the-monetary-policy-trade-offs-between-output-inflation-and-macro-financial-stress-conditions/

 

Is higher stock market concentration good or bad for Corporate America?

Podcast: https://bit.ly/3F1fpgN

Article: https://ayafintech.network/blog/is-higher-stock-market-concentration-good-or-bad-for-corporate-america/

 

Geopolitical alignment often reshapes and reinforces asset market fragmentation in the broader context of financial deglobalization.

Podcast: https://bit.ly/3ZpGMcD

Article: https://ayafintech.network/blog/geopolitical-alignment-often-reshapes-and-reinforces-asset-market-fragmentation-in-the-broader-context-of-financial-deglobalization/

 

The global cloud infrastructure helps accelerate the next high-tech revolutions in electric vehicles (EV), virtual reality (VR) headsets, artificial intelligence (AI) online services, and the metaverse.

Podcast: https://bit.ly/47pDk3z

Article: https://ayafintech.network/blog/the-global-cloud-infrastructure-helps-expand-what-can-be-made-digitally-viable-from-electric-vehicles-and-virtual-reality-headsets-to-artificial-intelligence-metaverse/

 

How can generative AI tools and LLMs help enhance human productivity?

Podcast: https://bit.ly/4elAFKv

Article: https://ayafintech.network/blog/generative-artificial-intelligence-uses-large-language-models-and-content-generation-tools-to-enhance-human-productivity/

 

Both BYD and Tesla have become serious global manufacturers of electric vehicles (EV) worldwide.

Podcast: https://bit.ly/3BgL0sL

Article: https://ayafintech.network/blog/mainstream-technological-advances-in-the-global-auto-industry/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Meta Platforms (U.S. stock symbol: $META).

Podcast: https://bit.ly/3Vt1Sng

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-meta-platforms-meta/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Alphabet Google (U.S. stock symbol: $GOOG).

Podcast: https://bit.ly/46yuX5T

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-alphabet-google-goog/  

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Nvidia (U.S. stock symbol: $NVDA).

Podcast: https://bit.ly/3Kh8Qta

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-nvidia-nvda/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Tesla (U.S. stock symbol: $TSLA).

Podcast: https://bit.ly/4nRGLqy

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-tesla-tsla/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Apple (U.S. stock symbol: $AAPL).

Podcast: https://bit.ly/4ndXt3K

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-apple-aapl/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Amazon (U.S. stock symbol: $AMZN).

Podcast: https://bit.ly/46fUWQE

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-amazon-amzn/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Microsoft (U.S. stock symbol: $MSFT).

Podcast: https://bit.ly/46biKoG

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-microsoft-msft/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of IonQ (U.S. stock symbol: $IONQ).

Podcast: https://bit.ly/3IXfnss

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-ionq-ionq/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Oracle (U.S. stock symbol: $ORCL).

Podcast: https://bit.ly/47fF94u

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-oracle-orcl/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Netflix (U.S. stock symbol: $NFLX).

Podcast: https://bit.ly/4q7cTss

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-netflix-nflx/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Palantir (U.S. stock symbol: $PLTR).

Podcast: https://bit.ly/4gZTiWO

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-palantir-pltr/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of AT&T (U.S. stock symbol: $T).

Podcast: https://bit.ly/4q2VfG4

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-att-t/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of T-Mobile (U.S. stock symbol: $TMUS).

Podcast: https://bit.ly/4mV2ays

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-t-mobile-tmus/ 

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Cisco Systems (U.S. stock symbol: $CSCO).

Podcast: https://bit.ly/48gGjxM

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-cisco-systems-csco/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of AMD (U.S. stock symbol: $AMD).

Podcast: https://bit.ly/470BoPm

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-amd-amd/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Salesforce (U.S. stock symbol: $CRM).

Podcast: https://bit.ly/46LpXvZ

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-salesforce-crm/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Uber Technologies (U.S. stock symbol: $UBER).

Podcast: https://bit.ly/4nOTVFm

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-uber-technologies-uber/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of IBM (International Business Machines) (U.S. stock symbol: $IBM).

Podcast: https://bit.ly/4ohozqT

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-ibm-ibm/

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Intuit (U.S. stock symbol: $INTU).

Podcast: https://bit.ly/4ohAKUE

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-intuit-intu/ 

 

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fundamental analysis of Texas Instruments (U.S. stock symbol: $TXN).

Podcast: https://bit.ly/4nVq0Ly

Article: https://ayafintech.network/blog/gen-ai-fundamental-analysis-of-texas-instruments-txn/

 

Industry Analysis

AYA ebook hyperlink: https://bit.ly/4hxvrwy

AYA ebook length: 283 pages (21 chapters and 122,241 words).

 

Stock Synopses for the Top 20 Tech Titans

AYA ebook hyperlink: https://bit.ly/3VR7Ka5

AYA ebook length: 449 pages (20 chapters and 168,639 words).

 

Top-Tier Self-Improvement Book Reviews

AYA ebook hyperlink: https://bit.ly/46Iqkrc

AYA ebook length: 133 pages (10 chapters and 54,529 words).

 

Bidenomics

AYA ebook hyperlink: https://bit.ly/44CdDu7

AYA ebook length: 206 pages (18 chapters and 90,405 words)

 

Trump Economic Reforms

AYA ebook hyperlink: https://bit.ly/2ZwYfiE

AYA ebook length: 507 pages (21 chapters and 97,854 words)

 

Modern management macro themes, insights, and worldviews

AYA ebook hyperlink: https://bit.ly/2IezdQh

AYA ebook length: 225 pages (top 40 recent management book reviews)

 

Economic science macro themes, insights, and worldviews

AYA ebook hyperlink: https://bit.ly/3FaegyI

AYA ebook length: 220 pages (top 40 recent economic science book reviews)