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- Hacker News
- Did anybody think Grumpism was going to go somewhere other than here? It's merely been the spite choice the whole time - a way for economic losers to stick their thumbs in the eyes of people who had been mildly successful. Pure crab bucket mentality, now with $40T more in the hole - and still no actual solutions to the problems we are facing. But that certainly doesn't stop those problems from being brought up to rally support for the next con job. And the people at the top certainly aren't suffering! We have basically squandered the advantages our grandparents sacrificed for, to satisfy some kind of collective ego based around American exceptionalism and ignorant fundamentalism.
(edit: I guess a lot of people still aren't ready to hear it)
by mindslight - Obama sped up the rate of growth of the debt around 2010 and the percentage growth annually has been consistent since then (i.e. linear on the log scale): https://usafacts.org/answers/how-much-debt-does-the-us-have/.... Not even counting the jumps in response to the 2008 recession and COVID.by rayiner
- by toomuchtodo
- So what should those in the US and overseas do? Buy things and hoard before they get expensive? Buy gold? Something else? Taking a loan might be bad.by dhab
- Organize
- Higher interest rates basically mean that asset prices will crash, at least in real terms. The value of an asset is the discounted value of all future cash flows; as the discount rate goes up, the value goes down, particularly for assets (like AI stocks) where the cash flows are far in the future.
Unfortunately the right asset to hold depends on why rates are going up. If you believe that rates are going up because we're in for high inflation rates ahead and so bondholders need to be compensated for expected face-value depreciation, then you should buy hard assets (gold, oil, Bitcoin) or stocks that generate a lot of cash now (utilities, FANGs, commodity producers like oil companies). But if you believe that rates are going up because the Fed is going to hike rates and get inflation under control, the right asset to hold is cash. Every other asset will lose value as rates go up and cash becomes scarce, and then you can pick them up cheap when we get the inevitable steep recession.
by nostrademons - It is like watching on repeat the EU imploding from the debt crisis in 2009.
The only difference is that the US can inflate away their debts and the world will keep buying the usd.
The EU had to impose strict austerity, and essentially all the banks stopped providing any liquidity to businesses. Entrepreneurship and research just died overnight.
by whatever1 - The EU didn't have to impose strict austerity. It was just the policy they went with and it ended up being worse than what the US did in the financial crisis.by mono442
- Correct me if I'm wrong but isn't there an inherent vicious cycle in that if the price gets too high our ability to pay it off becomes uncertain, at which point the premium for the risk would shoot up dramatically (and so on)?by zug_zug
- No, there is no credit risk, they print the money.by barchar
- The US government only borrows in the us dollars. It's not possible that they won't be able to pay it off.
The yield increase is basically the market pricing in the interest rate increases since they're expected now.
by mono442 - Nope. Government debt has existed for a long time in the US. There is no plan to pay it off ever. Headlines will scream that the debt is too high for a long time to come.
Government debt yields on the short end are set by the Fed. Long yields are "set by the market" based on inflation fears, and mostly guessing what the Fed will set rates to over the next 10+ years.
Japan had way higher Debt-to-GDP for decades, yet the long term yields were low. Why? The central bank said "we anticipate yields to be set low for a long time" and did so for a long time. Recently they said they are going to "respond to inflation" like all other central banks and suprise, surprise the long end is creeping up. "Bond vigilantes" came into existence as soon as the central bank changed their policy.
by howeyc - Only of the government both simultaneously refuses to raise taxes and refuses to control spending. Because the central bank can choose to set the rate, as Japan did for decades.
Given the wealth distribution of the population has become so unequal, raising taxes for the purposes of lowering the deficit is a politically impossible option. So the only politically feasible option is controlling spending.
by drmathias - USA won't ever default so you will get money back at maturity date. But I will largely question the inflation at that point. If inflation goes significantly higher than the rate you are being paid it becomes self-destructive loop.by Ekaros
- That's correct. The root cause is that the government is making promises it can't keep, which make those promises worthless. The correction is usually that that government falls, and a new government starts making smaller, more achievable promises that restores trust in it.by nostrademons