"Hell To Pay": This Is What America's Debt Doomsday Looks Like

Many were shocked when on the first trading day after the Moody's downgrade, stocks - which had slumped in premarket trading - soared and closed solidly in the green. How could that be? After all back in August 2011 when S&P became the first rating agency to downgrade the US, the S&P tumbled 7% in a few days. The answer is simple: as we explained yesterday, "Investors Accepted The Fact That U.S. Debt Will Expand At An Absurd Pace... Until There Is Hell To Pay."

In his latest Chart of the Day (note available here to pro subs), DB thematic strategist Jim Reid echoed this sentiment and wrote that "one the most widely acknowledged things in financial markets is the unsustainable path of the US national debt. The big unknown is when it all tips over." 

Reid's own view is that Liberation Day has likely brought that reckoning forward. That's because whether voluntarily (as per Stephen Miran's Mar-A-Lago accord) or purely accidentally, the US's "exorbitant privilege" — its ability to borrow well below fair value — is gradually eroding, as is the dollar's reserve currency status.