So the very likely case is that. Relative wealth will decline. So in the near term, I think it's inevitable we have higher tax rates. I've said this before because in order to kind of meet the gap, even if we have these austerity measures or reduced costs or reduce the budget as the Republicans are going to push for as this debt ceiling debate reaches its apex in 60 days from now, which you better believe this is going to be pretty, pretty damn dramatic. And there's going to be real questions of what happens if the US defaults on its treasuries, if the US defaults on Obligations it has on treasuries. There will be a real shift away from using those assets as the baseline of the risk free rate worldwide.View on YouTube
Key elements of the normalized prediction were:
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Timing and drama of the apex – The podcast (Apr 7, 2023) implied the standoff would reach a dramatic climax ~60 days later (early June 2023). The U.S. hit the debt ceiling on January 19, 2023 and used extraordinary measures until Treasury Secretary Janet Yellen warned on May 1 that funds could run out as early as June 1 (later revised to June 5). Congress then passed the Fiscal Responsibility Act: House on May 31, Senate on June 1, signed June 3, ending the crisis right in that early‑June window. This was widely described as a last‑minute resolution to avoid default, i.e., a dramatic apex close to the predicted timing. (en.wikipedia.org)
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Serious market questions about possible U.S. default – During April–May 2023, market pricing and commentary clearly reflected non‑trivial default fears:
- 1‑year U.S. CDS spreads surged to an all‑time high of about 172 bps on May 10, as negotiations were deadlocked. (y94.com)
- Analysis by the Chicago Fed and MSCI estimated market‑implied default probabilities around 4% in April–early May 2023, far above normal levels, driven specifically by the debt‑ceiling episode. (chicagofed.org)
- Fitch put the U.S. on negative watch on May 24, 2023, explicitly warning that failure to resolve the ceiling could lead to missed payments and downgrades of affected Treasuries to default‑grade ratings. (en.wikipedia.org) These indicators show that investors and rating agencies were actively and seriously questioning the possibility of a U.S. default on Treasury obligations during roughly the forecasted window.
- Questions about Treasuries as the global risk‑free benchmark – While Treasuries ultimately retained their de facto role as the world’s main risk‑free asset, the debt‑ceiling episode did prompt explicit, high‑level questioning of that status:
- A May 3, 2023 White House Council of Economic Advisers note, citing Moody’s, warned that even a short breach could mean that if Treasury securities are no longer perceived as risk‑free by global investors, future generations would face permanently higher borrowing costs. (bidenwhitehouse.archives.gov)
- A May 2023 research note from Lombard Odier reminded clients that U.S. Treasury bills provide the risk‑free benchmark rate for financial assets worldwide and cautioned that any threat to that status would force a repricing of essentially all other assets, highlighting that the debt‑ceiling brinkmanship was testing this benchmark role. (lombardodier.com) Together, these show that mainstream policy and market analysis in that period was explicitly raising the question of whether Treasuries might cease to be viewed as perfectly risk‑free if the standoff led to default.
Nuance: The original spoken quote went further, suggesting a lasting “real shift away” from Treasuries as the baseline risk‑free asset. That stronger long‑term shift did not occur: the crisis was resolved in early June 2023 without default, and Treasuries remain the primary global risk‑free benchmark. However, the normalized prediction you provided only claims that, around June 2023, the standoff would (a) reach an intense, dramatic apex and (b) generate serious market questions about both default risk and Treasuries’ risk‑free benchmark status. On those narrower points, the events of May–early June 2023 match closely.
Given the timing, severity of market stress, and the documented debate over both default risk and the risk‑free status of Treasuries, the normalized prediction is best classified as right.