Crisis in Bond Markets Shrouded by Political Turmoil

In recent times, a wave of government crises has swept across several nations, with Paris, Tokyo, and London among those feeling its impact. The roots of these crises can be traced back to fiscal policies that have led to unprecedented levels of debt and interest burdens, previously described as a "fiscal crisis."

The population in these countries is growing increasingly resistant to making sacrifices, and some are considering voting for populist parties that promise relief from austere measures. This resistance is evident in the USA, where new tax laws have created large budget holes, and rising tariffs have failed to plug them.

The USA is not alone in this predicament. Europe and Asia are also grappling with similar issues, with increasing inflation risks being observed in all three regions. The European Central Bank (ECB) is being implicitly called upon to prevent a new Euro crisis, particularly in France and Italy.

Meanwhile, the UK is facing its own set of challenges, with the Chancellor of the Exchequer, Rachel Reeves, seemingly losing control of public finances. The current Finance Minister, Jeremy Hunt, is tasked with managing the situation.

The increase in public debt has been ongoing and steady, with no signs of slowing down. This steady rise has led to a dramatic development of public debt that is being passively accepted on bond markets. However, market observers are expressing doubts about several countries' ability to service their debts in the future.

Historian Niall Ferguson has pointed out that the interest burdens in the USA are already higher than defense spending, which he sees as an indicator of the USA's decline in power politics. The next debt wave is approaching, and the bond market reaction is understandable, but most governments lack the necessary elements for a fiscal recovery process.

US President Donald Trump is attempting to make the central bank compliant to reduce interest burdens, but this move is met with criticism and uncertainty. The sell-off has begun in the market, and the increase in public debt seems to be a slowly rising tide with no clear indication of when a disaster point will be reached.

The desire for fiscal dominance is apparent in the USA, and budget consolidation is proving difficult for several governments, with Paris blocking even small budget cuts and facing protests. Market observers were previously wondering why the dramatic development of public debt was being accepted without more concern, but it appears that the tide of unsustainable debt and fiscal woes is here to stay.