Hedge fund manager Bill Ackman sees U.S. long-term rates rising

1.The world is structurally different now than before. There is no longer a peace dividend. The long-term deflationary effects of outsourcing production to China no longer exist. The bargaining power of workers and unions continues to increase. Strikes are rampant, and with successful strikes resulting in significant wage increases, the likelihood of more strikes is also higher.

2.Energy prices are rapidly rising. Failing to replenish the SPR is a dangerous mistake. Our strategic assets should not be used to achieve short-term political goals. We must now supplement our strategic oil reserves while OPEC and Russia are reducing production.

3.The cost of transitioning to green energy is difficult to estimate both now and in the future. Rising natural gas prices will raise inflation expectations. Just ask ordinary Americans who see the prices at gas stations and grocery stores; they do not believe that inflation is slowing down.

4.Our national debt is $33 trillion and increasing rapidly. There are no signs of fiscal discipline from either party or presidential candidates. Every debt ceiling is an opportunity for our divided government and its most extreme actors to gain media attention and for our country to threaten default. This is not a good way to recruit many new buyers of bonds.

The government sells trillions of bills, notes, and bonds every week. China and other countries have been the main buyers of our debt historically but are now selling it. The QT experiment has only just begun. Imagine trying to conduct a large initial public offering where underwriters, insiders, and short sellers all sell simultaneously while analysts downgrade the rating to "sell" and compete to reach every bid during the downturn.

5.Our economic performance has surpassed expectations. Major infrastructure spending is beginning to contribute to economic growth and additional debt supply. Predictions of an economic downturn have been postponed until after 2024.

No matter how many times Chairman Powell reiterates his goal, the long-term inflation rate will not return to 2%. After the financial crisis, it was arbitrarily set as 2% in a world that is fundamentally different from the world we live in now.

Do you agree or disagree?