According to The Daily HODL: Veteran macro investor Luke Gromen is sounding the alarm for holders of US Treasuries, cautioning that their investments may ultimately prove to be unprofitable due to the nation’s growing economic vulnerabilities.
In a recent interview with Nicole Shanahan, the vice presidential running mate of Robert F. Kennedy Jr., Gromen expressed concerns about the United States' diminishing domestic manufacturing capacity, which he sees as a critical threat to national security. He contrasted the US economy with that of Russia, noting that while the US has a GDP ten times larger than Russia's, the US economy is increasingly focused on non-essential activities.
Gromen elaborated on this point by saying, "We might have 10 times the GDP Russia has, but Russia produces oil and tangible goods. A significant portion of our GDP is tied up in speculative activities like trading digital assets and real estate, which might be lucrative in peacetime but are essentially useless in times of war."
The US Debt: The Biggest Short
Gromen also highlighted the US national debt, which now exceeds $35 trillion, as "the biggest short." He warned that although investors in US Treasury bonds may eventually get their money back, the real value of those returns will be significantly eroded due to a decline in the dollar's purchasing power.
"You’ll get every dime back in Treasury bonds you own," Gromen explained, "but the purchasing power of that money will diminish drastically. What once could buy you a diamond necklace may only get you a cubic zirconia necklace or even a simple string of crackerjacks, akin to the ones you made for your mom in grade school."
Gromen's comments underscore a broader concern about the long-term viability of US debt as a safe investment, especially in the face of increasing global economic competition and internal economic shifts. As the US continues to grapple with its immense debt burden, investors may need to rethink their strategies to protect their wealth against the eroding value of the dollar.