Wicksell’s Theory Revisited: Why Investors Keep Funding America’s Debt

Deutsche Bank reinterprets Knut Wicksell’s natural-rate idea to explain why investors still fund the U.S. national debt despite large deficits: the U.S. economy’s strength and productivity, especially in technology and AI, keep high returns on equity, making official rates seem low by comparison. But if growth remains weak relative to deficits and risk perceptions rise, funding costs could rise as investors recalibrate.