I take that back there is a risk they decide to burn trust as someone who doesn't honor deals, which is a new risk that didn't really exist at the nation state level a generation ago...
Yields will rise and reallocation will occur to hedge against this inflation via debasement risk, as investors will manage against inflation adjusted real return versus other investment opportunities.
It was a mad strategy both cause more inflation with overspending and devalue the dollar! The traditional route for nation state debt management is to grow your economy to make the debt smaller, not make your currency worth less while contracting the economy by deporting a huge chunk of your workers.
The credit card of young workers and a growing population ("demographic dividend" in demographics parlance) has hit its limit to spend against, broadly speaking. You can either pay down the sovereign debt with higher taxes, default on it, or inflate it away. Growth is over, growing out of the debt will be impossible.
Terra Incognita: The Economics of a Shrinking World [pdf] - https://news.ycombinator.com/item?id=49352811 - August 2026
> "As of 2026, humanity is likely below replacement fertility. That has never happened before, not in wars or pandemics. But the real surprise is that the fall has been concentrated in low- and middle-income countries and among poorer and less educated women. We fit a single-factor model to 236 countries since 1950: the common component peaked in 1978, and what drives fertility down today are country-specific trends, 219 of them negative and not one leveling off. None of the commonly cited mechanisms can account for this pattern, so we offer a conjecture: modernity itself, which makes a third child expensive and childlessness cheap. Children come in integers, so it takes very little to move a cohort’s fertility rate from 1.8 to 1.3. And nothing in an economy pushes fertility back to 2.1. We close with the main economic consequences, in particular slow growth."
The demographic future of humanity: facts and consequences [pdf] - https://news.ycombinator.com/item?id=44866621 - August 2025 (400 comments) (slides 31-33 of this PDF)
More US Counties See Population Drops Under Trump’s Immigration Crackdown - https://www.bloomberg.com/news/articles/2026-03-26/us-census... | https://archive.today/OGwWj - March 26th, 2026
The US Is Flirting With Its First-Ever Population Decline - https://www.bloomberg.com/news/articles/2026-01-30/trump-imm... | https://archive.today/LdA0d - January 30th, 2026
Goldman Strategists See US Stocks Lagging All Peers Next Decade - https://www.bloomberg.com/news/articles/2025-11-12/goldman-s... | https://archive.today/aINUx - November 12th, 2025
(think in systems)
is unwilling, or has been told to be afraid of?
Let's take the US, where you have to consider lending money to the government for 10 years at 5.009%. This barely covers inflation if you consider real numbers rather than the financial fiction ones that have been published in the last 10-20 years.
In the 90s, an era of relative prosperity when the US was the sole remaining superpower, 5-year treasuries were paying 7-9% with inflation in the 2-4% range!
One crucial difference: the US wasn't $40T in debt, and it wasn't pulling trillion dollar deficits. In 1998 the US federal government actually had a surplus! Even 9% interest wasn't going to wreck the Federal budget when the overall amount of debt to be serviced was so much lower.
Everything is relative to size. If your older brother lends you a dollar at 100% daily interest, you can still throw a balled-up Jackson at him a couple days later and walk away clean. But ask anyone who agreed to a crazy 20% interest rate on their car loan what it did to their personal finances, and all you'll hear is horror stories. 9% on $40T would be suicide.
Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
I wish you luck. Endless promises and short term thinking are the main things the system incentivizes. Each politician is temporarily renting their seat, paid for by other people. Each bureaucrat is studiously, steadfastly avoiding learning anything that threatens their continued employment, which is paid for by other people.
Maybe we should consider the possibility that there is no such candidate, or if there is, they cannot compete against the 'populists'. What then?
I think Clinton was the last us president to balance the budget and start reducing the deficit so I guess see what he did.
Then 1994 happened, and the Contract With America. The Republicans took both the House and the Senate, and they passed a balanced budget , then, whether Clinton liked it or not.
So that's what "Clinton" did. He pretended he was going to do something, and the Republicans called his bluff, and made him do it.
Note well: Republican majorities in any other set of circumstances have not yielded a balanced budget. I'm not saying that they're the answer (what they did under Trump shows that they very clearly are not the answer for fiscal responsibility). All I'm saying is that "Clinton balanced the budget", while technically true, isn't really the way that played out.
Who could you vote for, in any democracy, that would fit this?
Also, how many voters would have the wherewithal to identify such a person?
We do have the name of one politician who balanced the New York City budget though. Its probably not going to please a lot of people to hear that guy's name though. But that's what people want, right? Balanced budgets?
But no. That's not what people want and we all know it.
Conservatives gave up on principles long ago and have settled for simply lying about everything, including what's happening and who's responsible for it.
Rates going higher increases interest expense materially. You either rack new debt or you cut in places that are uncomfortable. The point is: responsible leadership in the developed world has gone mia for decades. There's a price to be paid that's real.
Just seems like one of those weird ambiguities.
Promises kept. All is good
I'm not predicting that this will happen, but we do need to take the debt seriously and not assume we will be able to just print money to get rid of it.
Every sovereign can print money and repay lenders, but doing so cause an inflationary cycle. When it looks like that is inevitable, borrowing rates start spiralling, so you have to print more money, and soon you are Zimbabwe.
Like the US is catastrophically indebted -- both parties have been negligent on this, though one party has been much, much worse than the other -- and right now there's a certain defeated malaise about 40T in debt. The last time bond rates were this high the country had only $6T in debt, and even that was considered a catastrophic level, and bond rate trends are...not looking good for those want government funds leftover after servicing the debt.
"Oh but we'll just grow the economy..."
The debt has grown by 6.5x, and the GDP has grown by 2.8x since 2002. The math just isn't mathing. And remember that bond prices were historically low, and if there was ever a time to pay down the debt....
Nope, $2T deficit, "hide in the ballroom bunker and hold the world hostage with the nuclear launch button" projects, and now a hilarious $1.3T bribe to voters. Utterly busted. It is astonishing that it took this long for the world's lenders to chuckle and say nah.
You just pay off old promises that were expected to be kept.
The real risk is that new lenders will not be willing to lend you, yes. But not outright inflation.
If you follow the accounting in a floating exchange rate system you’ll find they don’t.
Find me a banker that will turn down free basis points and I’ll show you a pink unicorn.
Debt service costs as a percent of GDP are in fact lower than they were in the 1980's, when things came out fine. Is this the best way to run the budget? Likely no. Should we make policy changes? Certainly yes.
Is the best way to drive that policy argument flinging around adjectives like "catastrophically indebted". No. If you have a suggestion make a suggestion. Screaming about "The Problem" without discussing policy is echo chamber logic.
You could very easily force congress to balance the budget (both parties and the media have complained endlessly about this for exactly no good reason). You could also freeze spending at current levels and force congress to do it's job: allocate our limited resources most productively.
Hard to get re elected doing the right thing, but maybe we just need a throw away set of leaders to do the hard work?
This is as close as it can be to clearly explain. The problem is that most of our politicians are not explaining it and instead ignoring it. As an individual the only thing you can do is vote for candidates who are willing to have that hard conversation with the public. Unfortunately it looks like that would require voting for a third party candidate and a vanishingly small minority of the electorate is willing to do that. So given all of that context I'm not really sure that the term "Catastrophically indebted" is wrong.
This is an amazing use of the "in fact" trope, in exactly the same misleading way. I talked about debt, and you casually shifted to servicing costs which presumes that rates stay historically low...when they're actually rapidly rising. Comical.
In the 1980s, the debt to GDP ratio was less than half what it currently is. Rates were higher, making the debt a crisis level then, but maybe you haven't noticed...rates are going up. Indeed, right now the rates were historically low, and anyone with functioning grey matter saw what was coming.
The US has an absolutely solidified, structural deficit -- utterly zero chance of paying down the debt, and a desperate need to constantly be borrowing more -- and an enormous debt. The trajectory of rates say this is crisis levels.
It's actually kind of funny reading your ridiculous comment -- "screaming", "echo chamber", etc -- when you sound completely in denial.
Your argument is basically the guy that used the "0% interest for six months" checks he just got with his 28% credit card, telling everyone that it's free money, so there's no problem if he goes wild. ROFL.
Sounds like it's time for a $1.5T military budget and a $1.3T bribe! Free money!
Sidenote: When asked about the bond market, Trump seriously offered up the "military solution". Utter insanity.
The more clear it is, the cheaper 30 year bonds become.
If you buy an AI issue, then the AI company has the bank deposit and the bank still has the matching reserves needed to buy government bonds in the primary market. All that changes is the ownership tag on the bank deposit.
I suppose in that respect, all investments compete.
Op-eds claiming the opposite because "trust me bro" would also make me inclined towards the "data center build out for AI factors in for rising yields in sovereign debt"
10y OAT are at 4.5% and rising with almost 100bps difference with Germany and no budget for 2027 since there is no majority in the parliament.
There is also a 6% deficit expected and growth has been revised down to 0.4% although during the first 6 months of 2026 there was actually a decrease of 0.2% of GDP in total so finishing the year in recession is totally possible.
Unemployment could also reach around 9% (15% in real terms if you count the people who have given up and/or been removed from the stats since they ran out of benefits).
Finally gasoline could reach 3 euros/liter (USD $13 per gallon) before the end of the year (already sitting at 2.5 euros/liter in many parts of France right now).
/s
- James Carville
You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.
What's different between the two is that apparently China hasn't made an equivalent dent in its oil reserves, despite no significant reduction in travel, and despite reducing its import demand by 1 OPEC.
It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.
Apparently the main reason they have started buying crude again is not for internal consumption as much as taking advantage of the massive crack spread in refined petroleum products (like diesel) which they export.
From a distance, those look like pretty sound theories.
It's wild that the pols and talking heads in the US have been screeching about how "dangerous" China is since the 90s (I remember family members making crude jokes about why I should be learning Mandarin instead of Spanish in middle school) and, yet, here we are doing everything we can to hand them the reins of world power.
I think the easiest explanation is that this probably isn't true. The US SPR is underground, it would be quite easy for China to manage its equivalent in secret, for whatever reasons.
The Chinese EV shift is real and significant, though.
Notice that the stock market is at all time highs because 50% of the economy is grift now and not real. That is why Republicans go into vast deficit spending to pump up AI and worthless "high-tech", "disruptive" defense stocks.
Trump (and British pound saboteur Bessent) don't care one bit if the US plebs and the rest of the world suffer. The game is printing money, give it to grift companies like AI, have family invest early and get out if everything collapses. Probably they get into real estate cheaply due to foreclosures.