I’m not that smart, but I think this should incentivize the government to spend more (probably the entire point of cutting rates in the first place), and issue more debt, increasing the US$ M2.
I fail to see how this has anything less than upward pressure on M2, unless you mean it will increase *more* than my prediction.
The 10% won’t be this year, but should be a minimum however long it takes to move throughout the economy, starting with Nancy Pelosi, of course.
It’s not that simple. Fiscal policy is determined by election promises from years earlier, public sentiment and the will of politicians to make tough decisions that the public might not enjoy immediately. See eg Milei in Argentina or Howard in Australia. Earlier in Europe following World Wars, or Japan more recently, selling infrastructure to pay debt, despite cost of borrowing being negative. Even imposed externally like IMF in Latin American crisis or Greece. These have a far bigger weight than the cost of borrowing. In fact I’d bet on there being a positive correlation between low interest rates worldwide and lower government spending, since interest rates are usually cut after the government is unable to spend to stimulate the economy any further and is approaching debt levels where some form of austerity becomes necessary for reasons I can expand on if you wish.
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