Systemic Recklessness: Why Investors Must Prepare for the Consequences of Fiscal Fantasy
For decades, investors treated U.S. government debt as the ultimate “risk-free” asset — a bedrock of global financial stability. But we believe that era is ending. Twenty five years of systemic fiscal recklessness — now capped by the recently passed, and arguably most egregious “Big Beautiful Bill” — is rapidly becoming a significant macro risk that could destabilize markets and reset valuations.
And yet, many investors remain anchored to assumptions that no longer hold. We believe that’s a mistake.
The numbers are startling — and getting worse:
According to the nonpartisan Congressional Budget Office, the federal deficit – the gap between government revenue vs. spending – is projected to exceed $1.9 trillion in 2024, despite strong GDP growth and low unemployment (4.1% as of June 2025).
Federal debt is currently $36.2 trillion, approximately 121% of GDP — with no meaningful plan to reverse course.
Net interest payments on that debt are the fastest-growing budget expense, currently at $952 billion in 2025.
The money supply (M2), after contracting in 2023, has surged back to over $21.5 trillion, reigniting concerns of latent inflation pressure.
In other words: we are piling on debt with the zeal of a crisis, without the presence of one.
The recent passage of President Trump’s signature “Big Beautiful Bill” — a sweeping fiscal package combining infrastructure spending, new tax incentives, and expanded defense outlays — has only added fuel to the fire. While the bill has popular appeal and short-term stimulus effects, independent forecasts suggest it could add over $4 trillion to the national debt over the next decade.
Proponents argue this will be more than offset by faster economic growth. But with growth already strong, unemployment low, and asset prices elevated, this kind of spending is irresponsible. Rather than stabilizing public finances, Washington has chosen to double down on debt-funded expansion.
This is not fiscal policy. It’s fiscal fantasy.
Importantly, this is not a partisan critique. Both political parties have contributed to the current trajectory — expanding spending without offsets and avoiding hard choices on long-term obligations. Structural deficits persist even in good times, and there is little appetite for real fiscal reform.
Meanwhile, the Fed is signaling openness to cutting rates later in 2025 — despite a resilient economy, sticky services inflation, and already-elevated asset valuations. Lower rates may provide short-term relief for debt servicing costs or inflate asset bubbles further, but they ultimately delay the reckoning and increase long-term fragility.
Yes, the bubble may inflate a while longer. If the Fed begins cutting rates into year-end — despite real GDP growth above 2% and a still-tight labor market — we could see another leg higher in asset prices. But when the next crisis does hit — whether triggered by a bond market revolt, a liquidity event, or a geopolitical shock — we hope investors are not only prepared to weather the storm but positioned to capitalize on it.
At SignalEdge we believe having capital available to act quickly — rather than locked into long-term passive allocations — is no longer a luxury; it’s a necessity. We don’t claim to know the exact timing of the next dislocation. But we know this: the ingredients are here — fiscal irresponsibility, political paralysis, and monetary policy distortion.And we aim to capitalize on it in a systematic, risk-controlled way.
