Yes, I’m very concerned. But I don’t think politicians will be able to solve it… not the R, not the D. The nature of politicians is to spend money (shuttled to contracts of friends) or reduce taxes (for their friends).
Ben Franklin: "“A republic, if you can keep it.”
When investors don’t want to buy or hold Treasuries any longer because they perceive the risk is too high, then interest rates from short to long term will rise, public, private, and corporate debts will become unserviceable, and we’re really in for bad times in this country.
I think what they will do is let inflation run hot, then cut interest rates, again putting us into a negative real interest rate situation. This happened after WW2 when the US was paying off war debts. The US Dollar will fall, because the purchasing power will decrease over time. This is also Lyn Alden’s idea.
The solution is don’t hold only US Dollar assets in your portfolio. Some foreign stocks, foreign bonds, gold & silver, commodities, I’m even waiting for Bitcoin to get below $10,000 to buy it again.
Could it be solved over time? Yes, but as you say not by our Congress nowadays. We would need to cut spending and actually operate in the black so that we could buy back our debt. We just aren’t fiscally responsible enough to do that.
Inflation is already running hot and has been for some time because the Fed was behind the curve in raising rates coming out of the Covid restart. The Fed has a dual mandate on inflation and employment and they have indicated they are willing to sacrifice employment to curb inflation this time around. They are NOT going to cut rates until inflation is under control…
Here’s a calculation for you. If the debt was reduced a dollar per second -ie- the debt clock starts ticking backwards on it net $1/second, it would take 1 million years to bring us to zero debt:
$1/second only comes out to a little over $31M per year. That’s a rounding error. For reference, there are $15B in earmarks in the latest bloated spending bill.
Honestly though, no one really cares enough to attempt to fix the problem…
Majority of the debt we owe to ourselves,something like $24 trillion. The government might pay off all the foreign debt and then move the goalpost for its citizens.
So I’m a big fan of diversification. I looked at my cash pile, and realized it was all US Treasury Bills and I-Bonds.
I have a very large T-Bill position maturing in February. I’m going to push the cash into Ally Bank, which is still paying 3.3%. Of course, if the Federal Government totally collapses, FDIC is gone too, but I just don’t want to have to pay for home renovations and summer travel and find out "Whoops! T-Bill proceeds payout will be delayed for a while… or, redemptions will be “gated”… and the length of the delays to be determined by some a***oles in Washington DC. I guess you could say I’m diversifying my cash. I also have some at my local credit union, enough to pay bills for a month or so.
When I read that back to myself, it’s totally sad… a US Citizen doesn’t think a T-Bill is money good. Can things really be that messed up?
GEORGE WASHINGTON’S FAREWELL ADDRESS | SATURDAY, SEPTEMBER 17, 1796
“However [political parties] may now and then answer popular ends, they are likely in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion.”
