America’s Fiscal Dominance Problem

by Nato Balavadze

In this paper, we discuss:

• Fiscal dominance and political risk in the US;
• Post-BBB fiscal position of the US and their debt outlook;
• How the Fed independence ended up under political pressure;
• Recent market dynamics: yields, inflation expectations, and term premia;
• Global implications: how US fiscal dominance and the weaponization of the Dollar are eroding investors’ confidence in Treasuries and the US;
• The spillover to the US equity markets; and
• The concluding paradox of control: how reducing Fed independence will lead to “higher” rates in the medium term.

Download PDF: US Fiscal Dominance October 2025