Cowley compares US to ‘80 times leveraged hedge fund'

Old Mutual Asset Managers' head of fixed income Stewart Cowley has slammed the US for failing to rein in its growing budget deficit, warning it risks ingraining inflation in the nation's psyche.

Speaking at a Morningstar Investment Conference this week, Cowley said the US budget deficit resembles an over-leveraged hedge fund, and urged the Federal Reserve to start cutting the deficit now before inflation expectations become embedded. "US borrowing is nearly at the $9trn mark. This kind of borrowing is grotesque and simply cannot go on," said Cowley. "US reserves look like an 80 times leveraged hedge fund, and no-one would want to buy that, but the country just keeps on unreservedly spending $1.5trn a year. The consequences will eventually result in inflation being embedded in...