These arguments no longer stack up, at all. If bond markets don’t want to fund a deficit now a government in many countries can simply turn its back on the market and fund itself. It’s not governments that are being shunned now: it’s the bond markets that are. The situation has completely reversed.
The same is true on interest rates. QE has proved that these are now almost entirely under government control. Threats to rates from the bond market no longer really exist in any meaningful sense.
So will money flee? It can still. It’s true that money is moving towards the dollar, for example. But the reasons have nothing to do with deficits. They have instead to do with economic fundamentals. Exchange risk has not gone away. Governments who, for example, wish to put themselves outside world trading blocs when the full extent of our interdependency is becoming ever more apparent, do see moves against their currency. But that’s not because of the scale of spending; that’s because of relative trading weaknesses in the real economy.
So, the bond markets are now neutered.
The age old threat to government’s spending, always wheeled out by the supposedly great who were rarely up to much good, has been laid to rest. Thank goodness.
There still both FX and inflation to deal with.
But beyond that just look at how he’s actually thinking. There’s some reification of “bond market” there instead of it being what it is, the aggregate of tens of millions of savings decisions. And those decision aren’t going to change are they? Peeps will save money in things they value, not in things they don’t.
This is the flip side of his Green Bonds etc ideas. No idea of where the demand for a savings instrument comes from.