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Feb 28 - 12:55 PM

MUFG: Don’t Assume US “Exceptionalism” will Persist; Here is Why?

By eFXdata  —  Feb 28 - 11:15 AM


MUFG scrutinizes the concept of US economic exceptionalism in light of its considerable fiscal deficits. The analysis explores the substantial fiscal support extended to the US economy pre- and post-pandemic, leading to significant budget deficits. Comparing the fiscal outlook of the US with the euro-zone and the UK, MUFG raises concerns over the sustainability of US fiscal policies and their implications for future economic performance and the value of the US dollar.

Key Insights:

  • Extensive Fiscal Support: The US's economic resilience is partly attributed to extensive fiscal support, including the Trump tax cuts and various fiscal packages aimed at supporting companies and boosting consumer savings.

  • Contrasting Budget Deficits: The US's budget deficit significantly exceeded those of the euro-zone and the UK in 2021, with IMF projections indicating continued high deficits in the US compared to its peers over the next five years.

  • Implications for Future Growth: The reliance on fiscal support is seen as borrowing growth from the future, posing risks of higher inflation, weaker GDP growth, and a depreciation of the US dollar.


While the US enjoys certain competitive advantages, such as technological innovation and labor market flexibility, MUFG highlights the challenges posed by its unsustainable fiscal deficits. The analysis suggests that the long-term consequences of these fiscal policies may undermine the US's economic exceptionalism, leading to potential adverse effects on inflation, growth, and the currency's strength.

MUFG Research/Market Commentary


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