Patrick T. Fallon/Agence France-Presse/Getty Images“The peace dividend is clearly at the end of the road. We are likely to see higher real rates and we’re likely to see higher nominal rates.”Billionaire Ken Griffin, head of the Miami-based hedge-fund manager Citadel, said higher baseline inflation may go on for decades, caused by structural changes that are pushing the world toward de-globalization.Speaking at a Bloomberg forum in Singapore on Thursday, Griffin said this will have an impact on the cost of funding the U.S. deficit. He added that the U.S. is “spending on the government level like a drunken sailor,” and that higher interest rates are something the government hadn’t counted on “when we went on the spending spree.” The country had more than $33 trillion in national debt as of September and a fiscal deficit of almost $1.7 trillion for the fiscal year to date since October 2022. Read: Who is Ken Griffin? 5 things to know about the hedge-fund billionaire who just gave Harvard $300 million.Griffin’s comments come ahead of a U.S. 30-year Treasury bond auction Thursday afternoon, which will provide another test of investor demand for long-dated government debt. Tuesday and Wednesday’s sales of 3- and 10-year notes went well, offering hope that potential buyers can withstand a continued onslaught of supply.The U.S.’s current fiscal situation is unsustainable and Americans realize “something is not quite right,” Griffin said, according to Bloomberg. Meanwhile, he said, there are multiple trends “that are pushing us toward de-globalization.” Griffin referred to what he calls the “peace dividend,” or economic boost that countries enjoy during periods of peace, and said that’s “clearly at the end of the road” given wars between Russia-Ukraine and Israel-Hamas. “We are likely to see higher real rates and we’re likely to see higher nominal rates.”Ten- BX:TMUBMUSD10Y and 30-year Treasury yields BX:TMUBMUSD30Y were higher at around 4.5% and 4.7% Thursday morning, as traders sold off long-dated debt on signs of continued strength in the labor market. Stocks DJIA SPX COMP turned lower.Speaking at a separate event earlier this week, Griffin also said that investors need to invest in China since it’s no longer preferable to be only in U.S. companies. Also this week, he told the Financial Times that the Securities and Exchange Commission should focus on banks instead of hedge funds in tackling the risks arising from basis trades.
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