Debt, Inflation, and the Risky Macro Regime of Fiscal Dominance — with Jim Masturzo | Treussard Talks (E23)

The conventional tools of monetary policy assume the central bank is in charge. What happens when the debt burden gets large enough that it isn't? At some point — and no one knows exactly when — raising rates stops cooling the economy and starts feeding it, because the interest expense on the debt itself becomes a source of stimulus. That's fiscal dominance. It's not a theoretical curiosity. It's the logical destination of a decade of spending without restraint.

Jim Masturzo has been thinking about this carefully. As CIO of Research Affiliates — the firm behind one of the most widely used asset allocation frameworks in the world — he spends his days asking what today's market and economic circumstances imply for the decade ahead. We recorded this conversation on February 25, 2026, days before the US–Iran war began. We weren't talking about the news. We were talking about the structure underneath it. That structure hasn't changed. If anything, it's more visible now.

You'll hear us cover:

• Why starting conditions (yields, valuations) matter more than long-run historical averages
• How to think about expected returns without confusing "expectations" for "predictions"
• The CAPE ratio near 40: what it implies for US equities relative to the rest of the world
• Debt, deficits, and the logic of financial repression
• Fiscal dominance: when higher rates can become inflationary via interest expense dynamics
• Why non-US assets can benefit in a weaker-dollar regime
• Real assets and commodities as diversification in inflation-volatile periods
• Private credit, insurance balance sheets, and where the next fragilities might hide
• AI, software pricing power, and second-order risks to credit and cash flows

If this conversation resonates, there's more where it came from. Wealth, Empowered is my newsletter — published twice a month. Just rigorous but accessible thinking about markets and wealth, and what it actually means to manage money with purpose. Written for people who want to understand what's happening, not just be told what to do about it.

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Disclaimer: This content is for informational and educational purposes only and is not financial advice. Views are those of the host and guest. Consult your own advisor before making investment decisions. Full disclosures: https://www.treussard.com/