Donald Trump campaigned on reducing spending and getting the growing deficits of the US economy under control. Elon Musk was appointed to advise the Department of Government Expenditure on where and how to cut spending, but that amounted to very little. “The Big Beautiful Bill,” which is very much a Trump-style name of the bill, increases tax breaks and raises the debt ceiling for the US, allowing further borrowing to fund the government.
The US debt-to-GDP ratio is now well over 120%, and interest on the debt is one of the fastest-growing line items in the budget. This mirrors how emerging markets sometimes fund spending with unsustainable borrowing. The dollar is still the world’s reserve currency, but continued printing and borrowing raise questions about its long-term stability. They still have deep and liquid capital markets, unlike most of their emerging market peers, but the trajectory matters and if left unchecked could lead to embedded inflation and political dysfunction!
Deficits don’t matter. Until they do.
For years, the United States has enjoyed a unique position in the global financial system: it borrows in its own currency, it prints the world’s reserve currency, and global demand for U.S. Treasury bonds has been insatiable. But as the government continues to rack up trillion-dollar deficits with little sign of restraint, an uncomfortable question is starting to creep into serious financial circles:
Is the U.S. beginning to act like an emerging market?
This may sound like an exaggeration. But let’s take a step back and look at some of the warning signs.
1. Debt and Deficits Out of Control
The U.S. now runs $1.5–$2 trillion deficits annually — even in times of economic growth. The national debt has passed $34 trillion, and it’s rising faster than GDP. According to the Congressional Budget Office, interest payments alone are on track to exceed defence spending by 2027.
In emerging markets, this kind of imbalance often ends in currency depreciation, inflation, or a debt crisis. The U.S. may be years away from that — but the path looks eerily familiar.
2. Fiscal Dominance is Creeping In
In a healthy economy, monetary policy (interest rates, money supply) is used to control inflation and stabilize the business cycle. In an unhealthy one, monetary policy bends to fiscal needs — essentially printing money to cover government overspending.
We saw this during the pandemic, when the Fed bought trillions in government debt to fund relief programs. And while that was arguably necessary at the time, the precedent is now set. The Fed may be one crisis away from re-entering that role — not to fight inflation, but to keep the government solvent.
This is textbook fiscal dominance — and it’s a hallmark of struggling economies.
3. Erosion of Institutional Credibility
From debt ceiling showdowns to trillion-dollar coin proposals, U.S. fiscal governance is increasingly driven by short-term politics rather than long-term sustainability. Meanwhile, faith in central bank independence has been tested by political pressure to cut rates or resume quantitative easing.
Emerging markets often suffer from poor institutions and policy inconsistency. If the U.S. continues down this path, investor trust could eventually break.
4. Currency Debasement Risk
Despite the noise, the dollar remains strong — for now. But long-term trends matter more than momentary strength. The more dollars the government issues to cover deficits, the more future value is diluted. In recent years, investors have been quietly responding:
- Gold demand is rising.
- Bitcoin is gaining mainstream adoption.
- Foreign central banks are slowly diversifying away from U.S. Treasuries.
This is exactly how confidence erodes in a dominant currency — not all at once, but gradually, and then suddenly.
Is the US Really Emerging Market Material?
Not yet.
The U.S. still has massive advantages: deep capital markets, an entrepreneurial economy, a global military presence, and the world’s most liquid currency. These are not things you give up overnight.
But history is clear: status is not a guarantee — it must be maintained. Empires can drift into decline when they assume the rules no longer apply to them.
Why This Matters to Investors
If the U.S. continues along this trajectory:
- Inflation could remain structurally higher.
- Interest rates may be forced down artificially.
- The dollar may weaken over time.
- Hard assets (gold, Bitcoin, real estate) may outperform.
- Emerging markets with strong balance sheets could benefit.
In short: the world’s economic centre of gravity may be shifting — slowly, but surely. As investors, it pays to watch not just the numbers, but the behaviour behind the numbers.
Final Thought
No one rings a bell when a superpower drifts. But when debt spirals out of control, when institutions falter, and when monetary policy becomes a fiscal tool — the warning signs start to look awfully familiar.
“Emerging market” might still sound like an insult when applied to the U.S., but the deeper concern is whether we’re gradually importing emerging-market behaviour — and whether global markets will eventually respond.
Now might be a good time to ask:
What would you invest in if the U.S. weren’t the world’s safe haven?
The Big Beautiful Bill: Is the US turning into an Emerging Market?
Donald Trump campaigned on reducing spending and getting the growing deficits of the US economy under control. Elon Musk was appointed to advise the Department of Government Expenditure on where and how to cut spending, but that amounted to very little. “The Big Beautiful Bill,” which is very much a Trump-style name of the bill, increases tax breaks and raises the debt ceiling for the US, allowing further borrowing to fund the government.
The US debt-to-GDP ratio is now well over 120%, and interest on the debt is one of the fastest-growing line items in the budget. This mirrors how emerging markets sometimes fund spending with unsustainable borrowing. The dollar is still the world’s reserve currency, but continued printing and borrowing raise questions about its long-term stability. They still have deep and liquid capital markets, unlike most of their emerging market peers, but the trajectory matters and if left unchecked could lead to embedded inflation and political dysfunction!
Deficits don’t matter. Until they do.
For years, the United States has enjoyed a unique position in the global financial system: it borrows in its own currency, it prints the world’s reserve currency, and global demand for U.S. Treasury bonds has been insatiable. But as the government continues to rack up trillion-dollar deficits with little sign of restraint, an uncomfortable question is starting to creep into serious financial circles:
Is the U.S. beginning to act like an emerging market?
This may sound like an exaggeration. But let’s take a step back and look at some of the warning signs.
1. Debt and Deficits Out of Control
The U.S. now runs $1.5–$2 trillion deficits annually — even in times of economic growth. The national debt has passed $34 trillion, and it’s rising faster than GDP. According to the Congressional Budget Office, interest payments alone are on track to exceed defence spending by 2027.
In emerging markets, this kind of imbalance often ends in currency depreciation, inflation, or a debt crisis. The U.S. may be years away from that — but the path looks eerily familiar.
2. Fiscal Dominance is Creeping In
In a healthy economy, monetary policy (interest rates, money supply) is used to control inflation and stabilize the business cycle. In an unhealthy one, monetary policy bends to fiscal needs — essentially printing money to cover government overspending.
We saw this during the pandemic, when the Fed bought trillions in government debt to fund relief programs. And while that was arguably necessary at the time, the precedent is now set. The Fed may be one crisis away from re-entering that role — not to fight inflation, but to keep the government solvent.
This is textbook fiscal dominance — and it’s a hallmark of struggling economies.
3. Erosion of Institutional Credibility
From debt ceiling showdowns to trillion-dollar coin proposals, U.S. fiscal governance is increasingly driven by short-term politics rather than long-term sustainability. Meanwhile, faith in central bank independence has been tested by political pressure to cut rates or resume quantitative easing.
Emerging markets often suffer from poor institutions and policy inconsistency. If the U.S. continues down this path, investor trust could eventually break.
4. Currency Debasement Risk
Despite the noise, the dollar remains strong — for now. But long-term trends matter more than momentary strength. The more dollars the government issues to cover deficits, the more future value is diluted. In recent years, investors have been quietly responding:
This is exactly how confidence erodes in a dominant currency — not all at once, but gradually, and then suddenly.
Is the US Really Emerging Market Material?
Not yet.
The U.S. still has massive advantages: deep capital markets, an entrepreneurial economy, a global military presence, and the world’s most liquid currency. These are not things you give up overnight.
But history is clear: status is not a guarantee — it must be maintained. Empires can drift into decline when they assume the rules no longer apply to them.
Why This Matters to Investors
If the U.S. continues along this trajectory:
In short: the world’s economic centre of gravity may be shifting — slowly, but surely. As investors, it pays to watch not just the numbers, but the behaviour behind the numbers.
Final Thought
No one rings a bell when a superpower drifts. But when debt spirals out of control, when institutions falter, and when monetary policy becomes a fiscal tool — the warning signs start to look awfully familiar.
“Emerging market” might still sound like an insult when applied to the U.S., but the deeper concern is whether we’re gradually importing emerging-market behaviour — and whether global markets will eventually respond.
Now might be a good time to ask:
What would you invest in if the U.S. weren’t the world’s safe haven?
Asset Class Returns
The table below represents a rolling year view of the major asset class returns that we track. It offers a view of the asset classes we use to diversify your portfolio.