Invest
US debt explodes as deflation sets in
The US will take on trillions in debt to subsidise its stimulus packages in the worst blowout since the GFC, with advisers believing deflation will set in for the next 12 months.
US debt explodes as deflation sets in
The US will take on trillions in debt to subsidise its stimulus packages in the worst blowout since the GFC, with advisers believing deflation will set in for the next 12 months.

The US Treasury will borrow $US2.999 trillion in privately held net marketable debt to pay off “new legislation to assist individuals and businesses” as well as changes to tax receipts and an increase in the assumed end-of-June Treasury cash balance.
The US Treasury is also widely expected to add an additional $677 billion during the July–September 2020 quarter.
“At the beginning of 2020, the US economy was in the midst of the longest recovery in American history,” said Assistant Treasury Secretary Michael Faulkender. “Yet towards the latter part of the first quarter, the US economy experienced an exogenous shock from the 2019 novel coronavirus (COVID-19) pandemic and the extraordinary measures taken to respond to it.”
The shutdown from COVID-19 has seen US GDP fall by 4.8 per cent, with the comparative three consecutive quarters of growth in the range of 2.0 to 2.1 per cent.

Freakonomics has predicted that the US economy loses between $US16 billion and $US19 billion a day while the country remains in lockdown.
Unemployment claims have also reached more than $US30 million. But eyes are now returning to the recovery, with some seeing the “bold steps” taken by the Trump administration as enough to offset the shock.
“Although available data suggests that economic growth will slow further in the second quarter of 2020, we are convinced that the downturn will be temporary, given that its cause was not the result of any underlying imbalances in the economy,” Mr Faulkender said.
“The US economy has demonstrated significant resilience in recent years, and although the onset of the pandemic was an exogenous shock, our response to it has been swift and comprehensive, with a view to limiting any future damage to the economy.”
However, Elliot Hentov, head of policy research, EMEA, at State Street Global Advisors, believes investors should not be concerned about a year of deflation.
“While markets are forward-looking, we find the concern over inflation misplaced this early in the downturn,” Mr Hentov said.
“The deflationary forces will be all-powerful for the coming year, even with the optimistic assumptions that COVID-19 treatments improve drastically and there is a ready-made vaccine over this time period.
“Then, once recovery sets in, there will be plenty of standalone hysteresis effects that produce an overhang to the economy and keep demand depressed.
“This macro driver will offset any supply-side inflationary impulses for a considerable amount of time. In short, investors do not need to position for inflation as the relative risks still skew the other way.”
About the author

About the author


Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more

Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more

Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more

Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more

Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more

Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more

Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more

Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more

Economy
Economist calls for July RBA rate cut following inflation data
An economist from State Street Global Advisors has called for the Reserve Bank of Australia to cut interest rates in July following today's Consumer Price Index data for June. Read more

Economy
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively. Read more

Economy
Global markets face turbulent start amid tariff concerns, but outlook remains cautious
Global equity and bond markets have experienced a turbulent start to 2025, primarily due to concerns that a potential tariff-driven trade war could heighten inflation and recession risks. Read more

Economy
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May. Read more

Economy
RBA delivers widely expected rate cut as inflation optimism balances global uncertainty
The Reserve Bank of Australia has cut the cash rate by 25 basis points, delivering on widespread market expectations while signalling a clearer directional shift towards less restrictive monetary ...Read more

Economy
Economist warns strong jobs data may delay further RBA rate cuts
Strong employment growth in April has put expectations for multiple interest rate cuts at risk, though upcoming economic data may clarify the need for lower rates, according to State Street Global ...Read more

Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more

Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more