Fiscal Dominance Is Breaking The 60/40 Portfolio | Matt Hougan & Bob Haber

Bob Haber says the dollar has lost more than 99% of its value since the Federal Reserve was created, with debasement accelerating after the end of the dollar’s gold link roughly 50 years ago. The speakers argue that markets are now shifting from a QE-led regime toward one driven by Treasury financing, deficits, and fiscal dominance.

The speakers link stablecoin growth to the Treasury’s need for dependable buyers of short-term government debt, noting that stablecoins generally hold a high proportion of Treasury bills. Bob Haber says the government must refinance roughly $12 trillion annually, potentially rising to $15 trillion-$16 trillion within three years, while a rise in unemployment from 4% to 6% could push financing needs to roughly $14 trillion-$16 trillion and sharply pressure bond yields if buyers resist the additional issuance.

Bob Haber argues that tax breaks and government programs without corresponding payment amount to a debasement strategy financed through large-scale issuance of fiat-denominated government bonds, while he says Scott Bessent and Warsh may be relying on AI-driven productivity growth to reduce the debt burden. He notes that productivity growth would need to triple quickly for that approach to work, something that has almost never happened.

The speakers argue that the traditional 60/40 portfolio is concentrated in fiat-denominated assets and benefited from an unusually favorable bond regime in which interest rates fell from roughly 18% to 0%. After 10-year rates fell to roughly 0% to 0.5% around COVID, Proficio removed bonds and selected gold and Bitcoin as equity diversifiers, while the speakers now view longer-duration bonds as less attractive in a debasement-focused environment.