In this episode of Forward Guidance, Felix interviews Kevin Muir, the author of The MacroTourist, about his macro framework that heavily emphasizes the fiscal side of the economy. Kevin explains how he shifted his thinking after the 2010s when quantitative easing didn't lead to the predicted inflation. He discusses Modern Monetary Theory (MMT) and its role in understanding the modern fiat-based monetary system, highlighting that governments are constrained by inflation rather than debt. They discuss the implications of higher interest rates, the irrelevance of credit ratings for governments, and the significant fiscal deficits in the U.S. compared to other countries. Kevin expresses concerns about the U.S. running large deficits and the potential for a "trustification moment" in the bond market, and advocates for owning long-dated options, particularly in foreign exchange, to navigate the current volatile environment.
