Let's talk about the characteristics of the era of fiscal dominance. A month ago, I wrote about the industry, market, and subsequent trends from the perspective of fiscal expansion 2.0. Recently, more and more institutions have begun to talk about entering the era of fiscal dominance. So what are the characteristics of the era dominated by finance: 1. The most crucial thing is no longer to focus on reducing expenditures, but to prioritize relying on strong economic growth to reduce the deficit ratio. As Besant said in June, "The key is that economic growth should be faster than debt growth. If we change the growth trajectory of the country and the economy, we can stabilize the finance and resolve debt through growth. 2. The transformation from a small government to a large government, and the deep involvement of finance in the industrial economy, such as Trump's recent Great Beauty Act, AI National Action Plan, and Stable Currency Act, has built a financial, industrial and economic policy with one body and two wings https://(x.com)/qinbafrank/status/1948189456584110278? s=46&t=k6rimWsEbo2D2tXolYcM-A。 Recently, the US Treasury Department has attempted to use policy subsidies to exchange equity in various chip companies, which can also be seen as the government's deep involvement in the industrial economy. 3. Stimulating economic growth through fiscal means will inevitably further increase the scale of debt, making debt the biggest constraint in the era of fiscal expansion. Under this constraint, the big government will pursue two things: first, to make every effort to obtain more fiscal and tax revenue. From this perspective, tariffs, chip export taxes, immigration gold cards, etc. are all aimed at obtaining more fiscal and tax revenue in order to reduce the deficit gap; Secondly, we will spare no effort to promote lower interest rates, which will help reduce interest payment costs and enhance export competitiveness. 4. Under the constraint of debt, bond defenders occasionally come forward to warn the government, causing market shocks and fluctuations. Of course, the market will look to see if it can really drive the economy higher and if the economic growth rate can outrun the deficit growth rate. If it is, people will believe this logic; if not, they will vote with their feet. 5. In the era of fiscal dominance, the core is whether the economy can run and control the risk of overheating, so as to achieve relative balance. And the independence of the central bank has always been a topic of discussion. Personally, I think it depends on the final effect. If we can achieve the goal of promoting economic growth, reducing the deficit, and allowing economic growth to outperform the deficit rate, I estimate that people will not pay too much attention to whether the central bank is independent (of course, it is not to say that the central bank is completely a puppet, but to a certain extent, we believe that everyone hopes to see some cooperation) 6. As mentioned in the previous tweet about fiscal expansion 2.0, the medium to long term logic is solid, and there may be small-scale risk shocks in the short term. These small-scale risk shocks may come from tariffs (which should have already been eliminated), possible inflation increases (currently experiencing signs, it needs to be proven whether it is a one-time event), and demonstrations by bond defenders (excessive bond issuance to replenish liquidity brings potential risks, of course, this shock should be much smaller than the same period in 2023).