Here’s the facts, most Americans don’t care about or even know about this issue. It’s not something that any significant numbers of people in Congress care about either. Nonetheless, the general school of thought is that running trillion dollar deficits year after year is going to at some point become a real problem:
We’re now beginning to see the real-life effects of an unsustainable federal debt load. To finance trillions of dollars in spending beyond what incoming revenue can support, the US Treasury is now issuing more debt in the form of Treasury securities than global financial markets can readily absorb. That forces the borrower—the US government—to pay higher interest rates, which in turn pushes up borrowing costs for consumers and businesses in much of the Western world.
It’s not yet a crisis, in the sense of an unavoidable calamity that will wreck careers and trash living standards. But the excessive debt of the United States now impacts anybody who takes out a loan or invests in stocks. Once a routine and unexciting part of the market, debt issuance by the Treasury is now a hot Wall Street topic as investors plot how to avoid losses — or capture profits — from this new source of volatility.
It is also bothersome from the standpoint of our foreign owned debt. Certainly the top two, China and Japan can not call it in at one time because it would do harm to their own currency basis. But I see it as a huge sword of Damocles hanging over us.
I absolutely do not claim to be an expert on this issue, just going on the assumption from what I’ve read and heard (Jerome Powell I believe said that the trajectory of the debt is unsustainable) about this issue.
“Yes, debt has to be repaid when it comes due. But maturing debt can be replaced with newly issued debt. Rolling over the debt in this manner means that it need never be “paid back.” Indeed, it may even grow over time in line with the scale of the economy’s operations as measured by population or GDP”
But when asked about the level of government borrowing relative to the past, the chairman suggested that rapidly rising debt levels could become a problem moving forward. “The path we’re on is unsustainable, and we’ll have to get off that path sooner rather than later,” Powell said.
I don’t doubt that. My point is that if, God forbid, Trump gets elected, you won’t hear a peep about debt for 4 years. If Biden gets re-elected, debt will be a huge problem.
It’s likely watching the fed struggling to bring down inflation we are already seeing the signs of what happens when you print too much money. Historically we always had one ace card and that was the USD dominance around the world that help keep us out of the mess certain countries went in when hyperinflation did happen. Brics has been set up for countries to go around the USD whether it fails or succeeds is yet to be seen but don’t think for a second these countries think they see the writing on the wall on the days of the USD’s dominance.
I agree with you there. Sean Hannity for example for Obama’s 8 years cried about the debt nearly every day, then once Trump became president the crying stopped.
I did too. What happened in the 2000’s was the dollar became a world currency. So, the GDP we are talking about now include all the countries that use a lot dollars or tie their currency to the dollar like china.
So billions of people use and buy dollars not just the 375 million in the US. As long as they buy our bonds there won’t be a collapse of the dollar. It reminds me of rome ending the republic becoming an empire because of all the territory they captured and had to run.
