6 ms·

Over $9T of Federal Debt Will Mature in the Next Four Years

42 points by Four_Star 7y ago

andrewla 7y ago
Looking at this number in a vacuum and not in light of total spending/borrowing, and looking at it in a linear scale, makes this not as interesting. To be clear, this is a huge number and generally government debt is the problem. But this is a record amount of debt only because EVERY YEAR is a record amount of debt. The article says that this "represent[s] the fastest growth in the amount of maturing debt since the Financial Crisis", but that's not true. Looking at the numbers, this represents a 10.0% increase from the previous year but 2012 gave us 10.7%. 2008, 2009, and 2010 represent bigger jumps, but you can argue that the financial crisis extended to 2010 (although you can argue that it's still not really over now -- definitions are hard). Pre-crisis we had 2003 13.5%, 2002 12.5%.
brink 7y ago
Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation?
- duxup 7y ago
  I think though the question is how does it bode for the dollar... relative to every other currency. I'm not saying it won't have any impact but the dollar has been attractive for all the usual reasons for a long time, and over the course of a lot of events that folks predicted would make it less attractive.
  - XorNot 7y ago
    To be more specific: where else is that money going to go? There's a number of small stable nations out there but none sell bonds in sufficient quantity to meet investor demand. The EU isn't a coherent enough financial sector to absorb that demand, nor stable enough. China isn't selling (and would be risky) - if you have large quantities of cash you need to park the US is still your best option unless you want to get into commodities and nothing is stable enough there.
- baron816 7y ago
  Yes, you are wrong that it will likely cause hyperinflation. Even if the Fed simply monetized that debt (which it won’t do) you might get some inflation, but nothing close to HYPERinflation. What’s more likely, as the article states, is that more investor money will go to the government rather than mortgages or commercial loans, which will slow the economy, drive up interest rates, and potentially cause deflation.
  - hylaride 7y ago
    A lot of the new bonds will replace what's already been loaned to the government, so what will matter is the delta between the interest rates on the old bonds and new ones as well as whether the new bonds have different maturity times. So how much rolling the debt over will drive up interest rates is debatable though the issuance of new debt to finance the current deficit is more likely to do that. Of course, that assumes that there are buyers for the rolled over debt. The biggest source of financing over the past 20 years (China) isn't exactly happy with the US government right now. That could drive up interest rates on the bonds and cause problems.
  - AnimalMuppet 7y ago
    Monetizing the debt won't cause hyperinflation... once. Doing it repeatedly may well do so.
- JumpCrisscross 7y ago
  > Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation? Yes. The effect of federal debt on money supply is de minimis. Much more important are economic growth (i.e. money demand), lending (i.e. money supply) and rates (i.e. the "price" of money).
- wahern 7y ago
  As others have pointed out, not hyperinflation. Hyperinflation requires a pathologically broken central government. One of the things that prevents that from happening in the U.S. is that the Federal Reserve is a quasi-public institution with a fixed mandate--low unemployment, moderate inflation. (Why moderate? Because a small amount of inflation incentivizes investments and consumption by preventing people from sitting on cash.) But it would be naive to say that the U.S. could never get there. The bulwark that protects the Federal Reserve has been steadily attacked from the right since the financial crisis. The GOP almost revolted against Bush for the bail-out, and because the government was slow to respond and did so anemically the Federal Reserve stepped into the void with massive infusions of cash. This resulted in cries for the Federal Reserve's independence to be diminished. Such opponents were never forced to reconcile with the fact that the Federal Reserve saved our bacon. Elsewhere, on both the left and right, you have the constant reminders that fiscal debt can be "fixed" by inflating away the debt. If our political culture continues to internalize that notion then at some point when things become more dire we may actually attempt it. But in as much as it's a viable approach, it could only possibly work from a position of fiscal and monetary strength, a position we would surely not be in were we seriously contemplating it.
- Agathos 7y ago
  When inflation is "merely" bad, a dollar loses half its value in a few years. In hyperinflation, a dollar loses half its value in a few minutes. The former is certainly possible we decide we want to maintain low taxes and big spending after investors stop buying bonds (hard to say when that happens). The latter would mean people have lost faith in the government's ability to carry out even its most basic functions.
  - shitgoose 7y ago
    "government's ability to carry out even its most basic functions." by looking at the current political circus it certainly seems that way.
nafey 7y ago
Feels like Wile E. Coyote who has sped off the cliff but will keep going until he inevitably looks downward.
- Four_Star 7y ago
  Indeed
vwarner1411 7y ago
Can someone ELI5 what this means?
- ahakki 7y ago
  Interest rates will go up.
  - MuffinFlavored 7y ago
    for what? mortgages? car loans? what else?
    - deleted 7y ago
      [deleted]
    - sokoloff 7y ago
      US Treasuries are considered the safest types of bonds (confining our discussion only to the US bond market). They are backed by the full taxation power of the US government and so are extraordinarily unlikely to default. In that sense, they set the "risk-free rate of return" by which other investments are baselined. Not happy with the 2.5% (or whatever) on a Treasury? Well, you might want to invest in a state/municipal bond, or a company's bond offering, mortgage-backed-securities, or stocks. You would only invest in those riskier investments if they promised to pay you a rate higher than the "risk-free" rate of Treasuries. In that regard, rising Treasury rates increase the market-clearing interest rates on any borrowing which is considered riskier than the US government's likelihood of non-payment, so in short, on all other sorts of borrowing. (On fringes, this may not be the case where statutory limits apply, such as on credit-card default rates. If the risk-free rate rises high enough though, such lending might be curtailed in favor of simply moving down the risk ladder if the returns become artificially compressed.)
  - harryh 7y ago
    I mean, maybe. But historically speaking that hasn't necessarily been the case.
- harryh 7y ago
antr 7y ago
It will simply be refinanced, like all other debt with sizeable balloon payments. The underlying problem is not the so much the maturity, which can create liquidity issues, but the continued use of debt to finance government deficits.
- vkou 7y ago
  This is not a problem as long as the RoI on spending is possible, or as long as the dollar value of the economy is expected to grow, through population growth, productivity gains, or inflation. A government budget is not a household budget, and the same rules don't apply to it.
perfunctory 7y ago
Why is this a news? Doesn't federal debt mature all the time?
- caprese 7y ago
  it isn't, someone wrote about it on an irrelevant site, someone posted it here and it trends here it just opens the discussion on this general topic, but nothing really about the specific thing being discussed
drocer88 7y ago
"If you have the right people, like, in the agencies and the various people that do the balancing ... you can cut the numbers by two pennies and three pennies and balance a budget quickly and have a stronger and better country." -Trump "I’m pledging to cut the deficit by half by the end of my first term in office." -Obama "We must balance the federal budget. We can do so without raising taxes. What we need to do is impose spending discipline." -George W. Bush [ Bill Clinton and Newt Gingrich actually did briefly balance the budget ] "Balancing the budget is a little like protecting your virtue: You just have to learn to say 'no'". -Reagan
- agildehaus 7y ago
  Obama did cut the deficit in half. More than half. At least over the course of his entire presidency, not sure about the first term.
  - jsight 7y ago
    It wasn't by the end of his first term, though, right? Fair point overall, though.
  - karl11 7y ago
    He did, but only after he doubled it his first couple years.
    - gnaritas 7y ago
      That's a lie, he was handed a trillion + deficit coming in; which he cut down virtually every year of his presidency.
    - bilbo0s 7y ago
      Well, again, in fairness, that was because the global economy had been run into the ground. The situation he stepped into had little to do with him.
      - leereeves 7y ago
ianai 7y ago
This discussion is so twisted with incorrect and downright offensive to proper reasoning rhetoric. Please look up modern monetary theory. Stephanie Kelton explained modern governmental finance very well in a pod cast on Tuesday last week with Chris Hayes. Basically, if the government runs a deficit then there is a surplus somewhere in the economy that otherwise wouldn’t be. The recent trillion dollar tax cuts and lack of resulting inflation underscore their point. The US and world economies are enumerated with USD - a fiat currency. The government says “you may pay your debts with our currency” and only they supply it. Which means all money comes from the government and only the government.
- pinhead 7y ago
  Link to the podcast in reference, very excellent episode: https://www.nbcnews.com/think/opinion/debunking-deficit-hysteria-stephanie-kelton-podcast-transcript-ncna1003301 https://www.nbcnews.com/think/opinion/debunking-deficit-hyst...
  - ianai 7y ago
    Thank you for the reference and transcript!
- AnimalMuppet 7y ago
  You seem to be assuming that MMT is The Correct Theory. That's... well, at a minimum, it's not an assumption that you should expect your readers to automatically recognize as correct as soon as you state it. In fact, it might take more than one podcast to convince people. For that matter, even Paul Krugman (a great friend of government spending freely) thinks MMT is very wrong.
  - ianai 7y ago
    I made a claim and supplied a reference for defense of the claim. Their claim is much closer to the true operations of government finance than the prevailing perceptions. They discuss Paul Krugman’s and Larry Summers’ criticisms in the podcast. multiple political cycles have been dominated by demonstrably false claims and those claims have been used to refute proper understanding and progress. It’s important to refute and push back against such dismissive rhetoric.

42 points by Four_Star 7y ago

Looking at this number in a vacuum and not in light of total spending/borrowing, and looking at it in a linear scale, makes this not as interesting. To be clear, this is a huge number and generally government debt is the problem. But this is a record amount of debt only because EVERY YEAR is a record amount of debt. The article says that this "represent[s] the fastest growth in the amount of maturing debt since the Financial Crisis", but that's not true. Looking at the numbers, this represents a 10.0% increase from the previous year but 2012 gave us 10.7%. 2008, 2009, and 2010 represent bigger jumps, but you can argue that the financial crisis extended to 2010 (although you can argue that it's still not really over now -- definitions are hard). Pre-crisis we had 2003 13.5%, 2002 12.5%.

brink 7y ago

Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation?

duxup 7y ago
I think though the question is how does it bode for the dollar... relative to every other currency. I'm not saying it won't have any impact but the dollar has been attractive for all the usual reasons for a long time, and over the course of a lot of events that folks predicted would make it less attractive.
- XorNot 7y ago
  To be more specific: where else is that money going to go? There's a number of small stable nations out there but none sell bonds in sufficient quantity to meet investor demand. The EU isn't a coherent enough financial sector to absorb that demand, nor stable enough. China isn't selling (and would be risky) - if you have large quantities of cash you need to park the US is still your best option unless you want to get into commodities and nothing is stable enough there.
baron816 7y ago
Yes, you are wrong that it will likely cause hyperinflation. Even if the Fed simply monetized that debt (which it won’t do) you might get some inflation, but nothing close to HYPERinflation. What’s more likely, as the article states, is that more investor money will go to the government rather than mortgages or commercial loans, which will slow the economy, drive up interest rates, and potentially cause deflation.
- hylaride 7y ago
  A lot of the new bonds will replace what's already been loaned to the government, so what will matter is the delta between the interest rates on the old bonds and new ones as well as whether the new bonds have different maturity times. So how much rolling the debt over will drive up interest rates is debatable though the issuance of new debt to finance the current deficit is more likely to do that. Of course, that assumes that there are buyers for the rolled over debt. The biggest source of financing over the past 20 years (China) isn't exactly happy with the US government right now. That could drive up interest rates on the bonds and cause problems.
- AnimalMuppet 7y ago
  Monetizing the debt won't cause hyperinflation... once. Doing it repeatedly may well do so.
JumpCrisscross 7y ago
> Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation? Yes. The effect of federal debt on money supply is de minimis. Much more important are economic growth (i.e. money demand), lending (i.e. money supply) and rates (i.e. the "price" of money).
wahern 7y ago
As others have pointed out, not hyperinflation. Hyperinflation requires a pathologically broken central government. One of the things that prevents that from happening in the U.S. is that the Federal Reserve is a quasi-public institution with a fixed mandate--low unemployment, moderate inflation. (Why moderate? Because a small amount of inflation incentivizes investments and consumption by preventing people from sitting on cash.) But it would be naive to say that the U.S. could never get there. The bulwark that protects the Federal Reserve has been steadily attacked from the right since the financial crisis. The GOP almost revolted against Bush for the bail-out, and because the government was slow to respond and did so anemically the Federal Reserve stepped into the void with massive infusions of cash. This resulted in cries for the Federal Reserve's independence to be diminished. Such opponents were never forced to reconcile with the fact that the Federal Reserve saved our bacon. Elsewhere, on both the left and right, you have the constant reminders that fiscal debt can be "fixed" by inflating away the debt. If our political culture continues to internalize that notion then at some point when things become more dire we may actually attempt it. But in as much as it's a viable approach, it could only possibly work from a position of fiscal and monetary strength, a position we would surely not be in were we seriously contemplating it.
Agathos 7y ago
When inflation is "merely" bad, a dollar loses half its value in a few years. In hyperinflation, a dollar loses half its value in a few minutes. The former is certainly possible we decide we want to maintain low taxes and big spending after investors stop buying bonds (hard to say when that happens). The latter would mean people have lost faith in the government's ability to carry out even its most basic functions.
- shitgoose 7y ago
  "government's ability to carry out even its most basic functions." by looking at the current political circus it certainly seems that way.

nafey 7y ago

Feels like Wile E. Coyote who has sped off the cliff but will keep going until he inevitably looks downward.

Four_Star 7y ago
Indeed

vwarner1411 7y ago

Can someone ELI5 what this means?

ahakki 7y ago
Interest rates will go up.
- MuffinFlavored 7y ago
  for what? mortgages? car loans? what else?
  - deleted 7y ago
    [deleted]
  - sokoloff 7y ago
    US Treasuries are considered the safest types of bonds (confining our discussion only to the US bond market). They are backed by the full taxation power of the US government and so are extraordinarily unlikely to default. In that sense, they set the "risk-free rate of return" by which other investments are baselined. Not happy with the 2.5% (or whatever) on a Treasury? Well, you might want to invest in a state/municipal bond, or a company's bond offering, mortgage-backed-securities, or stocks. You would only invest in those riskier investments if they promised to pay you a rate higher than the "risk-free" rate of Treasuries. In that regard, rising Treasury rates increase the market-clearing interest rates on any borrowing which is considered riskier than the US government's likelihood of non-payment, so in short, on all other sorts of borrowing. (On fringes, this may not be the case where statutory limits apply, such as on credit-card default rates. If the risk-free rate rises high enough though, such lending might be curtailed in favor of simply moving down the risk ladder if the returns become artificially compressed.)
- harryh 7y ago
  I mean, maybe. But historically speaking that hasn't necessarily been the case.
harryh 7y ago

antr 7y ago

It will simply be refinanced, like all other debt with sizeable balloon payments. The underlying problem is not the so much the maturity, which can create liquidity issues, but the continued use of debt to finance government deficits.

vkou 7y ago
This is not a problem as long as the RoI on spending is possible, or as long as the dollar value of the economy is expected to grow, through population growth, productivity gains, or inflation. A government budget is not a household budget, and the same rules don't apply to it.

perfunctory 7y ago

Why is this a news? Doesn't federal debt mature all the time?

caprese 7y ago
it isn't, someone wrote about it on an irrelevant site, someone posted it here and it trends here it just opens the discussion on this general topic, but nothing really about the specific thing being discussed

drocer88 7y ago

"If you have the right people, like, in the agencies and the various people that do the balancing ... you can cut the numbers by two pennies and three pennies and balance a budget quickly and have a stronger and better country." -Trump "I’m pledging to cut the deficit by half by the end of my first term in office." -Obama "We must balance the federal budget. We can do so without raising taxes. What we need to do is impose spending discipline." -George W. Bush [ Bill Clinton and Newt Gingrich actually did briefly balance the budget ] "Balancing the budget is a little like protecting your virtue: You just have to learn to say 'no'". -Reagan

agildehaus 7y ago
Obama did cut the deficit in half. More than half. At least over the course of his entire presidency, not sure about the first term.
- jsight 7y ago
  It wasn't by the end of his first term, though, right? Fair point overall, though.
- karl11 7y ago
  He did, but only after he doubled it his first couple years.
  - gnaritas 7y ago
    That's a lie, he was handed a trillion + deficit coming in; which he cut down virtually every year of his presidency.
  - bilbo0s 7y ago
    Well, again, in fairness, that was because the global economy had been run into the ground. The situation he stepped into had little to do with him.
    - leereeves 7y ago

ianai 7y ago

This discussion is so twisted with incorrect and downright offensive to proper reasoning rhetoric. Please look up modern monetary theory. Stephanie Kelton explained modern governmental finance very well in a pod cast on Tuesday last week with Chris Hayes. Basically, if the government runs a deficit then there is a surplus somewhere in the economy that otherwise wouldn’t be. The recent trillion dollar tax cuts and lack of resulting inflation underscore their point. The US and world economies are enumerated with USD - a fiat currency. The government says “you may pay your debts with our currency” and only they supply it. Which means all money comes from the government and only the government.

pinhead 7y ago
Link to the podcast in reference, very excellent episode: https://www.nbcnews.com/think/opinion/debunking-deficit-hysteria-stephanie-kelton-podcast-transcript-ncna1003301 https://www.nbcnews.com/think/opinion/debunking-deficit-hyst...
- ianai 7y ago
  Thank you for the reference and transcript!
AnimalMuppet 7y ago
You seem to be assuming that MMT is The Correct Theory. That's... well, at a minimum, it's not an assumption that you should expect your readers to automatically recognize as correct as soon as you state it. In fact, it might take more than one podcast to convince people. For that matter, even Paul Krugman (a great friend of government spending freely) thinks MMT is very wrong.
- ianai 7y ago
  I made a claim and supplied a reference for defense of the claim. Their claim is much closer to the true operations of government finance than the prevailing perceptions. They discuss Paul Krugman’s and Larry Summers’ criticisms in the podcast. multiple political cycles have been dominated by demonstrably false claims and those claims have been used to refute proper understanding and progress. It’s important to refute and push back against such dismissive rhetoric.