A US sovereign-debt stress event forces a fiscal regime change
FIN-01 · probability 62% (confidence 66%, ±12 pts) over 2026-2030 · horizon NEXT 3-5Y · domain finance. Probabilistic simulation, not advice.
The reading
Federal debt passed $37T in 2025, net interest now runs near $1T a year — more than defense — and Moody's stripped the last AAA in May 2025. History offers three exits from this position: grow out (needs 5%+ real growth), inflate away, or restructure; markets usually force the choice via a gilt-crisis-style repricing before politicians volunteer one.
What would prove this wrong
This projection is WRONG if through 2030 the US runs deficits under 4% of GDP for two consecutive years, term premia stay compressed, and no Treasury auction stress episode (tail >4bps with failed dealer absorption) occurs.
Trigger events tracked
- A weak 10Y/30Y auction cascade — tailing auctions, dealer share spiking, yields gapping 30bp+ in days
- A downgrade-plus-supply shock coinciding with a debt-ceiling standoff
- Foreign official demand rolling off while deficits stay above 6% of GDP
- A recession pushing the deficit toward 10%+ of GDP from an already-abnormal starting point
Causal chain
Historical precedents
If it happens
Field notes
2026-08-28: Adjudication clarification: the entry is graded on whether the stated event occurred by the resolve date — the falsifiability line is the pre-registered strong-refutation test, not a second event definition. The deficit, term-premium and auction clauses are read together as the refutation scenario; absent a qualifying stress event by 2030 the entry scores NOT OCCURRED. The failed-dealer-absorption clause is read per the primary-dealer takedown data the Treasury publishes. The sealed probability is unchanged.
Sources
Subjects this belongs to
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