Themen:
Insights July 8, 2026

US deficits: A new twist on Wicksell

PERSPECTIVES Special July 2026. This PERSPECTIVES Special looks at the fundamental reasons why the US can continue to attract capital and generate wealth while running current account and budget deficits.

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Knut Wicksell, the 19th century Swedish economist, was the first to highlight the consequences of a differential (or spread) between the natural rate of interest and market rates. Now, we argue, the key new “Wicksell spread” is between the natural rate of interest and overall capital market returns.

Key takeaways 

  • The US’s ability to attract capital and generate wealth has historically been helped by the country’s central role in the post-WW2 economic order.
  • Now increasing US productivity and return on equity (RoE), boosted by its tech dominance, provide a further compelling reason to invest in the US. The difference between this US RoE and the natural rate of interest is now the new relevant “Wicksell spread”.
  • Continued inflows will allow the US to bring forward future consumption and investment and will make it difficult for policy intervention to reduce US deficits or sustainably lower the value of the USD.

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