Central Banks Ditch Austerity—Now They’re ’Running It Hot’ Like a DeFi Degens

After a decade of belt-tightening, policymakers are pumping liquidity like a crypto bull market. The money printer’s back—and this time, it’s got inflation targets in the rearview mirror.

The pivot no one saw coming: From ’responsible fiscal stewardship’ to ’whatever it takes’ part deux. Quantitative easing never really left—it just took a coffee break while everyone pretended to care about debt-to-GDP ratios.

Market reaction: Traders front-run the policy shift (as usual), while pension funds pray the music doesn’t stop before they find a chair. Meanwhile, Bitcoiners nod smugly—their ’hard money’ narrative just got another boost from central bank fiat debasement bingo.

Welcome to financial repression 2.0—where the rules are made up, and the stability doesn’t matter. (Bonus jab: At least Wall Street banks get free money before they need it—unlike you plebs waiting for stimulus checks.)

Last week, Treasury Secretary Scott Bessent hinted at this pivot in a CNN interview:

“There is the potential growth of the debt, but what’s more important is we grow the economy faster. I inherited a 6.7% deficit as a percentage of GDP, and we’re trying to bring that down by decreasing spending, increasing revenue and [growing] the GDP faster than the debt.” 

Read between the lines of Bessent’s quote and you realize the implications for owners of US Treasurys. 

Luke Gromen said it best:

This is financial repression in action: Grow the way out of an elevated debt/GDP ratio by making bonds yield less than the growth rate of the economy.

For example, if bond yields remain fixed at 4% but the economy grows at 6% nominally, you can outgrow the debt since the yield is fixed and will become less of a burden over time as higher revenues make it less burdensome. 

I’m sympathetic to the idea Bessent articulated during the interview: The WHITE House wants to cut spending and increase revenues. However, squaring that idea with the House tax and spending bill, just passed overnight — it doesn’t quite pass the sniff test. 

The new bill WOULD increase deficits by nearly $3 trillion over the next 10 years:

Breaking down the calculus, a significant amount of the bill’s spending will need to be funded by higher debt issuance:

To play devil’s advocate, the scoring and measurement of this bill is fraught with inconsistencies that should be acknowledged: 

Semantics aside, it’s clear that the policy goal has shifted from one of austerity (remember DOGE?) to one that involves running the economy hot to outpace debt growth. 

This strategy is nothing new. In fact, it’s more in line with the US government’s approach from 2021 onwards.

In the great words of Lyn Alden: Nothing stops this train.

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