A tenth of a percentage point of extra productivity growth — well within the range of plausible near-term AI effects — raises the fundamental value of U.S. government debt by $1.3 trillion. If markets fully priced this in, nominal Treasury yields would fall by about 70 basis points.
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So when GDP grows faster, the government collects a lot more and spends only a little more. The difference flows straight to primary surpluses. Bondholders are implicitly holding a levered claim on GDP, financed by a short position in an inflation-indexed bond. That is a long productivity position.
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