Summary
- Long-term Treasury yields follow the direction of growth and inflation over time.
- Real per capita GDP growth continues to decline as population growth and productivity growth weaken under a growing debt overhang.
- Lower rates of real GDP growth create excess capacity in labor and industrial utilization that weigh on the inflation rate.
- Fiscal stimulus will create a short-term boost to growth and inflation at the expense of creating an even larger debt overhang that will weigh on productivity growth in the future.
- For ETF EDV, fiscals stimulus is a short-term negative as GDP will get a boost, but a larger debt overhang will suppress the growth and inflation rate, putting negative rates and massive gains for EDV firmly on the table.
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