Deutsche Bank: Wicksell's 'natural rate of interest' explains why investors keep funding US debt

Key Points:

• Deutsche Bank updates Wicksell’s theory to explain why investors remain committed to U.S. debt despite warning economic indicators and a massive $39.77 trillion national debt requiring $24 billion weekly service payments.
• The U.S. benefits from the dollar's unique global role, allowing it to borrow at relatively low interest rates, but this advantage is diminishing as deficits outpace growth, risking a market recalibration.
• High returns on equity in U.S. technology sectors, especially in AI, are increasingly attracting investment and helping to fund the country’s deficits, partially offsetting structural and geopolitical risks.
• While the U.S. is fundamentally living beyond its means, investor confidence persists due to superior productivity and returns from its tech dominance, creating a fiscal cycle where government borrowing supports AI investment, which in turn sustains economic growth.
• This dynamic makes the U.S. economy both a beneficiary and a potential victim of its own success, as continued investment in technology relies on ongoing borrowing and investor trust.