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This isn't talked about much but it has to be considered. There is a relationship between interest rates and the repayment rate of the 30 Trillion in US debt th
by m348e912 5y ago
This isn't talked about much but it has to be considered. There is a relationship between interest rates and the repayment rate of the 30 Trillion in US debt that's owed. Even a moderate increase in rates, to 5-6% (way short of almost 20% we saw under Volker), would be catastrophic in terms of being able to service the debt which would affect bond and treasury interest payments. Perhaps the Fed is stuck between a rock and a hard place. Continued inflation is the do-nothing outcome, which to me means it's more likely to happen.
- baryphonic 5y agoI've had a similar thought for a few years. It began to doubt it when it looked like we might actually correct for this with decent growth, including real increases in productivity-improving technologies. But the pandemic has now disabused me of any trust. We seem to be in some sort of regulatory-debt trap. The government needs growth to sustain itself, but it can't do that because it has no control over the administrative state. So therefore it inflates, which harms growth (and has horrible distributional effects) but helps with debt, at least until lenders stop showing up to the bond auctions.