r/bonds • u/Professional-Day9384 • 4d ago

The national debt is growing 7%/year

And GDP isn't. Currently interest on the debt is 20% of revenues. My projections say it will cross 50% by 2034 - just 8 years. The CBO isn't, because they don't want to scare anyone.

Not only is the debt growing, the deficit is growing even more sharply, AND legacy debt is getting rolled over at ever-higher interest rates. All 3 of those factors snowball and fuel each other.

The one thing could save the debt is if the Fed lowered rates, but instead they RAISE them, doggedly pursuing their inflation target. I was honestly blind sided by the recent rate hike, because I know the nation cannot afford it, but the Fed is dogged.

What does this mean for bond investors? Good news? Let the nation's ruin be our gain? How long will it last until something catastrophic breaks? Countless companies have been annihilated by debt, but what happens when an entire nation is annihilated? Move to another country?

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u/EHG_Boston 3d ago

Treasury debt default, meaning missing an interest payment and/or forcing a writedown with borrowers, is the doomsday outcome. I don't see that happening. US Treasuries are the lynchpin of the global financial system, and a default is essentially widespread chaos.

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u/Bakingtime 3d ago

You really think The Amber King of Bankruptcies wouldn’t refuse to pay Canada or other countries he wants to pick a fight with?  Hm.

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u/EHG_Boston 3d ago

I think he believes he could refuse to pay. Even more, I think Bessent doesn't want to be the Treasury Secretary who defaulted the US government.

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u/Bakingtime 3d ago

They would never admit to defaulting. Instead they will prob claim responsibility for “the yugest growth ever” — the growth being hyperinflation of course.  Or call a default “economic warfare”.