Trump administration 2024-2028
- Thread starter dimsum
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And there we go, ten year T bills trading at over 5%… Oil continuing to steadily climb with Brent and WTI both solidly over $100/bbl. Get ready for more angry presidential noises and blame deflection. He’ll be increasingly hellbent on finding distractions from the economic damage of his policies.
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Long-term rates aren't just a US problem, and are a consequence of many factors.
See here.
"For insight, I plot some of the international pattern. (Sorry, Fred only goes to June for the other countries.) It’s a global phenomenon. And it lines up roughly with fiscal policies. The US actually looks a lot like the UK, everyone’s favorite advanced-country fiscal and economic stagnation basket case. So much for exorbitant privilege, the idea that the “reserve currency” status of the dollar means we can borrow at low rates. But Germany isn’t far behind, and Japan has shown the steepest increase as its fiscal problems seem finally to be catching up to it."
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US Federal Government spending on just the interest payments on US debt is it equal to 20% of its total revenue…… Interest payments are now larger than defence spending.
US interest payments are between 3.2 - 4.2% it’s GDP.
For Germany it’s 0.7%. For Japan it’s 2%. For Canada it’s 1.6%.
Germany pays 30 Billion Euros on its debt in interest payments for 2026. Canada will pay 54 Billion CAD.
Stress testing this out 5yrs from now, if interest rate stay at current levels, across all of these countries - the US interest payments become 5-6% of its GDP. Meaning, interest debt payments of 1.75-2.1 Trillion a year. Putting it in another context- 27-33% of ALL US Federal revenue would go to just pay the interest on US debt……
For Canada interest payments will equal 2.1% of GDP by 2030. Germany will be on the best position, followed by us.
Yes, I’m aware, but as this is a thread on the U.S. administration, and as the U.S. currently suffers from a particular sort of executive immaturity, I decided to focus my reply on them.
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If deficit spending is the major underlying problem (it is, for pretty much everyone so affected), and in the US Congress retains full control of appropriations (it does), focusing attention away from other factors and using it as another haranguing point against Trump isn't particularly helpful. The actual structure and function of the US government should form the frame of the discussion. Someone could always start a new thread on foibles of the US Congress and leave this one for posting the daily Trump lamentations.
We could pretend the policy and foreign affairs decisions of Trump and his executive, certain de jure constitutional constraints notwithstanding, doesn’t have a major impact on bond and commodities markets… But that would be putting legal theory in a position of primacy over economic reality, and that doesn’t seem particularly honest. Foreign policy decisions that disrupt trade flows and creditor/consumer confidence have many real impacts that are distinct from those arising out of the congressional power of the purse.
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Bond buyers aren't demanding higher long-term yields ten and thirty years out because the Trump administration keeps shuffling goalposts that have impacts on a horizon of a few weeks or months. They're demanding higher long-term yields because they don't want to lose money to ham-fisted governments that are likely to corrode the value of their currencies.
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Trump said that DOGE savings would go to pay down the debt - didn't happen
Trump said that Tariffs would go to pay down the debt - didn't happen
Trump said that he wouldn't start any new wars and drive up spending because of it - didn't happen
Trump said that hiss tax plans would be 'debt neutral' - didn't happen
The Bond market is seeing someone who is not reliable and has a 18month track record of spending more, taxing less and is driving up the debt. The Bond market's traditional buyers in US Treasuries is also drying up - China, Japan and the Middle East is buying less Treasuries and other buyers (Norway) is selling off a significant portion of their US Treasuries.
The Bond market (like the equity market) thrives on stability - something that is currently in short supply in the US.
PrairieFella
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Statisically Trump has the largest share by a long shot that did get them into this debt quagmire. About 27% of all US debt was accumulated under Trump. His (and Biden's) reckless deficit spending has actively precipitated this crisis. I like Scott Galloway's slogan for the past 10-15 years of US governance; "We'll cut your taxes and still go to war". Reckless.
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Sure, all things that have short time horizons, and thus not what I am writing about. Also, money is fungible and - as I have written repeatedly on this side for decades - Congress controls the money. Trump can promise a new benefit - to cut a $5K cheque to every adult citizen, or to give all families with children the same amounts of money from child support programs, for example - but he can't do much about it without Congress.
As has been noted by multiple economists and other observers, the long-term debt financing rate problem exists for more countries than just the US. They are not all governed by Trump administrations; the US just happens to have a deficit spending problem more pronounced than many other countries.
I suppose American voters could elect Democrats, who have no plans for any new money they might raise with new taxes.
Not every issue has to be fitted with some misleading or less-than-fulsome angle to make it "Trump's fault" as if we were collectively the premier of BC.
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It doesn't matter which president it accumulates under. Congress does the budgeting; presidents just make budget requests. "Which president is responsible for the most debt" is one of the dumbest fucking games on the internet.
PrairieFella
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Its naive or intentionally obtuse to separate the congress and executive in this day and age. The current congress is an extension of presidential power as its plain to see. The same thing occurred with Democratic control during Biden's administration. The legislative branch has almost completely devolved authority to the executive branch.
QV
Army.ca Fixture
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Now do Canada. If that is such a problem for the US, is it also a major problem for Canada (the control of spending)?
PrairieFella
Army.ca Veteran
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Edit - removing as my comments were not aligned with the Trump Admin topic line. Mea Culpa
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It is vital to understanding how the US government works and how and why things happen the way they do, as opposed to just ranting against the Trump Lives In My Head Outrage of the Day, to pay attention to the separations of powers and not pretend they have atrophied to the point of meaninglessness. How many times does the legislative branch or judicial branch have to say "no" to whatever Trump wants to get a person to concede the latter are not joined to the executive?
Trump wants the Senate filibuster removed to support legislation he wants. Has it been? No.
Trump wants the SAVE Act passed and placed on his desk. Has it been? No.
Trump wants more stringent limits on birthright citizenship. Did the USSC grant his wish? No.
Trump wanted to use the USPO to exert more control over mailed ballots. Did the USSC grant the substance of what he wants? No.
Those are recent examples. Keep going back, and there are more. That the amount of push back and independent action does not match whatever a person would like does not mean there is none.