- Goldman Sachs is monitoring French fiscal credibility and market risk, while the CAC 40 reflects this specific political and fiscal risk premium.
- French fiscal stress is causing the Swiss franc to increase its appeal as a safe haven currency across Europe.
French Economic Distress Drives Capital Into US Treasuries
What happened
Money is pouring out of France and into US Treasuries due to French economic distress. This capital flight has also benefited UK gilts, causing the spread with French national debt to narrow markedly over the last month. The US recently surpassed $US40 trillion in debt, and the Congressional Budget Office projects that current deficits could push federal debt to 155% of GDP in 30 years if policy does not change.
From watoday.com.au
Why it matters
The flow of capital into US Treasuries reinforces the commanding position of the American dollar as the world's dominant reserve currency. This trend occurs despite the US having substantial budget deficits and high national debt.
French fiscal stress is increasing the appeal of the Swiss franc as a safe haven currency across Europe. Goldman Sachs is monitoring French fiscal credibility and market risk, which is reflected in the CAC 40.
From watoday.com.au
Who's involved
- Congressional Budget OfficeGovernment agency providing non-partisan economic assessments and tracking legislation.
- Phillip SwagelAmerican economist who serves as Director at the Congressional Budget Office.
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- FEDSpeculative
The FED might see its core business influenced by increased demand for US Treasuries resulting from capital flight.