US Sovereign Debt Fuels Housing and Healthcare Affordability Crisis

The expansion of US sovereign credit, driven by Treasury issuance backed by Federal Reserve operations, has created a structural bias toward monetary expansion. Regulatory frameworks such as Basel capital rules and liquidity coverage mandates compel banks to hold large amounts of Treasury securities, increasing their share of large‑bank assets from about 3% in 2013 to 11% in 2024.

This captive market for government borrowing, reinforced by post‑crisis regulations, limits market discipline and intensifies financial repression. As a result, asset prices such as homes have surged—median prices more than doubled—while real wages for production workers have risen only modestly. The disparity between asset‑holding households and wage earners has deepened the affordability crisis in housing, healthcare and education, which the author argues is a distributional consequence of the sovereign debt system rather than a market failure.

The analysis highlights the Cantillon effect—early recipients of new money benefit at the expense of later recipients—as the transmission mechanism that shifts costs onto consumers least able to absorb them. The author calls for recognition of how regulatory design amplifies these outcomes.