5 ms·

US 10-Year Breaches 5% as Inflation, Supply Worries Mount

70 points by toomuchtodo 1mo ago

toomuchtodo 1mo ago
https://archive.today/xgNhC https://archive.today/xgNhC
mindslight 1mo ago
Did anybody think Grumpism was going to go somewhere other than here? It's merely been the spite choice the whole time - a way for economic losers to stick their thumbs in the eyes of people who had been mildly successful. Pure crab bucket mentality, now with $40T more in the hole - and still no actual solutions to the problems we are facing. But that certainly doesn't stop those problems from being brought up to rally support for the next con job. And the people at the top certainly aren't suffering! We have basically squandered the advantages our grandparents sacrificed for, to satisfy some kind of collective ego based around American exceptionalism and ignorant fundamentalism. (edit: I guess a lot of people still aren't ready to hear it)
- rayiner 1mo ago
  Obama sped up the rate of growth of the debt around 2010 and the percentage growth annually has been consistent since then (i.e. linear on the log scale): https://usafacts.org/answers/how-much-debt-does-the-us-have/country/united-states https://usafacts.org/answers/how-much-debt-does-the-us-have/.... Not even counting the jumps in response to the 2008 recession and COVID.
  - BoiledCabbage 1mo ago
    Is this serious? It's because the country went through the great recession and was attempting to pull out and avoid financial collapse. Look at Revenue per year as a % of GDP and look at Expenses per year as a % of GDP. It's pretty clear. Expenses went up avoiding a depression which was done successfully, and revenue dropped due to the falling economy. The president was handed a collapsing economy and saved it. The issue is the other party that keeps getting handed great economies since the late 90s and fails to do anything but make the problem worse.
    - Frieren 1mo ago
      To some extend I hope that the Republican party wins the next election. They should be the ones fixing the economy, raising taxes, and doing something responsible for once. If Democrats win they are going to be blamed for being the "bad guys" for increasing taxes, controlling inflation and trying to get the economy back to shape. For Republicans to burn down the economy during their mandates has paid of as the next government needs to focus on firefighting instead of doing the good that it could have been done.
      - rayiner 1mo ago
        > To some extend I hope that the Republican party wins the next election. They should be the ones fixing the economy, raising taxes, and doing something responsible for once. The last small-government Republican was Herbert Hoover. Reagan paid lip service to the concept, but he maintained high spending levels to keep former FDR democrats in the fold.
      - stdatomic 1mo ago
        They'll just say economy was doomed because of Biden anyway, and that it's not their fault.
      - masklinn 1mo ago
        > To some extend I hope that the Republican party wins the next election. They should be the ones fixing the economy, raising taxes, and doing something responsible for once. Why would you ever think they’d be interested in doing any of that? A non-insignificant fraction of the gop wants to collapse the US entirely.
        immibis2 1mo ago
        And then nobody will vote for them ever again, and it'll be a utopia after the rebuild. Playing the long game.
        cindyllm 1mo ago
  - caycep 1mo ago
    https://fred.stlouisfed.org/series/gfdegdq188s https://fred.stlouisfed.org/series/gfdegdq188s Debt per GDP/size of US economy is more useful. Debt/GDP has the 2008 jump as the Obama Admin tried to (but not nearly enough) stimulate out of the housing crisis. Debt/GDP looks flat until 2020. 2008 and 2020 jumps make sense in the setting the 2008 crisis and COVID which was effectively a recession assuming you believe in Keynesian economics. Paying for US debt if you are the US is cheap when interest rates low. Trump/Bessent/Elon have been doing everything they can to drive up inflation, so now interest rates are necessarily going higher...
    - Jtsummers 1mo ago
      > Debt/GDP has the 2008 jump as the Obama Admin tried to Remember that 2008 was still Bush, Obama didn't become president until 2009.
      - caycep 1mo ago
        ah true, bipartisan stimulus then!
        pdoege 1mo ago
        Well, Trump was President in 2020. Biden started January 2021. Both of your examples show the aims and actions of the Republican Party. It isn’t bipartisan.
        caycep 1mo ago
        that was supposed to be a joke...
  - khriss 1mo ago
    Let's see, the biggest increases of debts under Democrats have been during the biggest financial crisis since the Great Depression And the biggest worldwide pandemic in a century. On the other hand, the biggest debt increases under Republican presidents have been to A) Start and fight multi trillion dollar wars in Iraq and Afghanistan and B) To cut taxes for billionaires and corporations.
    - Jtsummers 1mo ago
      And probably C) start a multi trillion dollar war in Iran.
      - 0cf8612b2e1e 1mo ago
        With a $1.5 trillion ~bribe~ rebate to keep them in power.
  - mindslight 1mo ago
    Cool story bro? I remember a whole lot of people who complained about the debt during the Obama years (I was right there with them), who are now completely silent or even full-throated support. Perhaps a few of the more "honest" ones you might be able to get a "I don't like everything he does" out of them. If I recall though, you personally did support Obama? Which would make your point doubly moot. Also note that my condemnation wasn't just about the debt per se, but rather the decreasing creditworthiness. Say what you will about Obama (I certainly have), but at least he kept up relations with our allies so they saw us as a strong partner worthy of holding their wealth.
    - rayiner 1mo ago
      > If I recall though, you personally did support Obama? Which would make your point doubly moot. I did personally support Obama. I still think he was a pretty good President! I’m simply describing the chart I linked to of debt levels on a log scale. Obama increased the slope of debt growth around 2010 and it has stayed around the same slope, with a vertical jump during covid. The point is that the debt growth rate isn’t a Trump thing. It’s the “new normal” since Obama, Trump, Biden, and Trump again.
      - mindslight 1mo ago
        So you were "simply" responding to one small part of my comment, with a narrative that sane-washes the whole larger picture. If you personally don't care about the debt, that's fine. But there are a lot of people who had claimed to, who have now turned their denial circuits up to 11. My "$40T more in the hole" aside was aimed at them.
zug_zug 1mo ago
Correct me if I'm wrong but isn't there an inherent vicious cycle in that if the price gets too high our ability to pay it off becomes uncertain, at which point the premium for the risk would shoot up dramatically (and so on)?
- nostrademons 1mo ago
  That's correct. The root cause is that the government is making promises it can't keep, which make those promises worthless. The correction is usually that that government falls, and a new government starts making smaller, more achievable promises that restores trust in it.
  - cyanydeez 1mo ago
    Unfortunately, divestment of the US dollar is like lighting a match in a house looking for the gas leak.
- howeyc 1mo ago
  Nope. Government debt has existed for a long time in the US. There is no plan to pay it off ever. Headlines will scream that the debt is too high for a long time to come. Government debt yields on the short end are set by the Fed. Long yields are "set by the market" based on inflation fears, and mostly guessing what the Fed will set rates to over the next 10+ years. Japan had way higher Debt-to-GDP for decades, yet the long term yields were low. Why? The central bank said "we anticipate yields to be set low for a long time" and did so for a long time. Recently they said they are going to "respond to inflation" like all other central banks and suprise, surprise the long end is creeping up. "Bond vigilantes" came into existence as soon as the central bank changed their policy.
  - nostrademons 1mo ago
    The inflation fears are part of the vicious cycle. The typical mechanism by which a government would get rid of inconvenient amounts of debt denominated in their own currency is to monetize it and inflate it away. Bond purchasers know about this, and build inflation expectations into the interest rates they are willing to accept. This increases the amount of interest the government has to pay, which makes its financial position even more precarious, which builds in future expectations of either a default or a soft-default through inflation, which pumps interest rates even more. It is possible to break this cycle, but it requires getting spending under control. As long as you operate in deficit, it requires finding private capital to finance future operations of the government. That private capital will require interest commensurate with the expected future devaluation of its principal to lend; otherwise they are just suckers. If you can bring spending into balance then you can hike rates and bring inflation under control and you'll be somewhat insulated from what bond purchasers are willing to accept, but if you can't then increases in rates just increase government spending as well. Japan operated at extremely high levels of debt-to-GDP because their deflationary trap turned all major Japanese corporations into large net savers. Why would you hold debt when you have to pay it back in more valuable yen in the future? That created a very large oversupply of private capital, which crowded into government bonds as the spender of last resort.
whatever1 1mo ago
It is like watching on repeat the EU imploding from the debt crisis in 2009. The only difference is that the US can inflate away their debts and the world will keep buying the usd. The EU had to impose strict austerity, and essentially all the banks stopped providing any liquidity to businesses. Entrepreneurship and research just died overnight.
- mono442 1mo ago
  The EU didn't have to impose strict austerity. It was just the policy they went with and it ended up being worse than what the US did in the financial crisis.
dhab 1mo ago
So what should those in the US and overseas do? Buy things and hoard before they get expensive? Buy gold? Something else? Taking a loan might be bad.
- arionhardison 1mo ago
  Organize
- nostrademons 1mo ago
  Higher interest rates basically mean that asset prices will crash, at least in real terms. The value of an asset is the discounted value of all future cash flows; as the discount rate goes up, the value goes down, particularly for assets (like AI stocks) where the cash flows are far in the future. Unfortunately the right asset to hold depends on why rates are going up. If you believe that rates are going up because we're in for high inflation rates ahead and so bondholders need to be compensated for expected face-value depreciation, then you should buy hard assets (gold, oil, Bitcoin) or stocks that generate a lot of cash now (utilities, FANGs, commodity producers like oil companies). But if you believe that rates are going up because the Fed is going to hike rates and get inflation under control, the right asset to hold is cash. Every other asset will lose value as rates go up and cash becomes scarce, and then you can pick them up cheap when we get the inevitable steep recession.
  - Ancalagon 1mo ago
    So buy stocks. Got it.
  - glaslong 1mo ago
    And if you believe a rate hike will happen but fail to control inflation due to various trade wars and hot wars, while stocks go down due to large correction on a small number of companies who accounted for most of the growth metrics...?
    - nostrademons 1mo ago
      Then you have to time the market. Cash or short-term treasuries right now, moved into long-term treasuries when rates finished going up, moved into stocks when the economic damage becomes apparent. Getting the timing right is left as an exercise for the reader.

70 points by toomuchtodo 1mo ago

https://archive.today/xgNhC https://archive.today/xgNhC

Did anybody think Grumpism was going to go somewhere other than here? It's merely been the spite choice the whole time - a way for economic losers to stick their thumbs in the eyes of people who had been mildly successful. Pure crab bucket mentality, now with $40T more in the hole - and still no actual solutions to the problems we are facing. But that certainly doesn't stop those problems from being brought up to rally support for the next con job. And the people at the top certainly aren't suffering! We have basically squandered the advantages our grandparents sacrificed for, to satisfy some kind of collective ego based around American exceptionalism and ignorant fundamentalism. (edit: I guess a lot of people still aren't ready to hear it)

rayiner 1mo ago
Obama sped up the rate of growth of the debt around 2010 and the percentage growth annually has been consistent since then (i.e. linear on the log scale): https://usafacts.org/answers/how-much-debt-does-the-us-have/country/united-states https://usafacts.org/answers/how-much-debt-does-the-us-have/.... Not even counting the jumps in response to the 2008 recession and COVID.
- BoiledCabbage 1mo ago
  Is this serious? It's because the country went through the great recession and was attempting to pull out and avoid financial collapse. Look at Revenue per year as a % of GDP and look at Expenses per year as a % of GDP. It's pretty clear. Expenses went up avoiding a depression which was done successfully, and revenue dropped due to the falling economy. The president was handed a collapsing economy and saved it. The issue is the other party that keeps getting handed great economies since the late 90s and fails to do anything but make the problem worse.
  - Frieren 1mo ago
    To some extend I hope that the Republican party wins the next election. They should be the ones fixing the economy, raising taxes, and doing something responsible for once. If Democrats win they are going to be blamed for being the "bad guys" for increasing taxes, controlling inflation and trying to get the economy back to shape. For Republicans to burn down the economy during their mandates has paid of as the next government needs to focus on firefighting instead of doing the good that it could have been done.
    - rayiner 1mo ago
      > To some extend I hope that the Republican party wins the next election. They should be the ones fixing the economy, raising taxes, and doing something responsible for once. The last small-government Republican was Herbert Hoover. Reagan paid lip service to the concept, but he maintained high spending levels to keep former FDR democrats in the fold.
    - stdatomic 1mo ago
      They'll just say economy was doomed because of Biden anyway, and that it's not their fault.
    - masklinn 1mo ago
      > To some extend I hope that the Republican party wins the next election. They should be the ones fixing the economy, raising taxes, and doing something responsible for once. Why would you ever think they’d be interested in doing any of that? A non-insignificant fraction of the gop wants to collapse the US entirely.
      - immibis2 1mo ago
        And then nobody will vote for them ever again, and it'll be a utopia after the rebuild. Playing the long game.
        cindyllm 1mo ago
- caycep 1mo ago
  https://fred.stlouisfed.org/series/gfdegdq188s https://fred.stlouisfed.org/series/gfdegdq188s Debt per GDP/size of US economy is more useful. Debt/GDP has the 2008 jump as the Obama Admin tried to (but not nearly enough) stimulate out of the housing crisis. Debt/GDP looks flat until 2020. 2008 and 2020 jumps make sense in the setting the 2008 crisis and COVID which was effectively a recession assuming you believe in Keynesian economics. Paying for US debt if you are the US is cheap when interest rates low. Trump/Bessent/Elon have been doing everything they can to drive up inflation, so now interest rates are necessarily going higher...
  - Jtsummers 1mo ago
    > Debt/GDP has the 2008 jump as the Obama Admin tried to Remember that 2008 was still Bush, Obama didn't become president until 2009.
    - caycep 1mo ago
      ah true, bipartisan stimulus then!
      - pdoege 1mo ago
        Well, Trump was President in 2020. Biden started January 2021. Both of your examples show the aims and actions of the Republican Party. It isn’t bipartisan.
        caycep 1mo ago
        that was supposed to be a joke...
- khriss 1mo ago
  Let's see, the biggest increases of debts under Democrats have been during the biggest financial crisis since the Great Depression And the biggest worldwide pandemic in a century. On the other hand, the biggest debt increases under Republican presidents have been to A) Start and fight multi trillion dollar wars in Iraq and Afghanistan and B) To cut taxes for billionaires and corporations.
  - Jtsummers 1mo ago
    And probably C) start a multi trillion dollar war in Iran.
    - 0cf8612b2e1e 1mo ago
      With a $1.5 trillion ~bribe~ rebate to keep them in power.
- mindslight 1mo ago
  Cool story bro? I remember a whole lot of people who complained about the debt during the Obama years (I was right there with them), who are now completely silent or even full-throated support. Perhaps a few of the more "honest" ones you might be able to get a "I don't like everything he does" out of them. If I recall though, you personally did support Obama? Which would make your point doubly moot. Also note that my condemnation wasn't just about the debt per se, but rather the decreasing creditworthiness. Say what you will about Obama (I certainly have), but at least he kept up relations with our allies so they saw us as a strong partner worthy of holding their wealth.
  - rayiner 1mo ago
    > If I recall though, you personally did support Obama? Which would make your point doubly moot. I did personally support Obama. I still think he was a pretty good President! I’m simply describing the chart I linked to of debt levels on a log scale. Obama increased the slope of debt growth around 2010 and it has stayed around the same slope, with a vertical jump during covid. The point is that the debt growth rate isn’t a Trump thing. It’s the “new normal” since Obama, Trump, Biden, and Trump again.
    - mindslight 1mo ago
      So you were "simply" responding to one small part of my comment, with a narrative that sane-washes the whole larger picture. If you personally don't care about the debt, that's fine. But there are a lot of people who had claimed to, who have now turned their denial circuits up to 11. My "$40T more in the hole" aside was aimed at them.

zug_zug 1mo ago

Correct me if I'm wrong but isn't there an inherent vicious cycle in that if the price gets too high our ability to pay it off becomes uncertain, at which point the premium for the risk would shoot up dramatically (and so on)?

nostrademons 1mo ago
That's correct. The root cause is that the government is making promises it can't keep, which make those promises worthless. The correction is usually that that government falls, and a new government starts making smaller, more achievable promises that restores trust in it.
- cyanydeez 1mo ago
  Unfortunately, divestment of the US dollar is like lighting a match in a house looking for the gas leak.
howeyc 1mo ago
Nope. Government debt has existed for a long time in the US. There is no plan to pay it off ever. Headlines will scream that the debt is too high for a long time to come. Government debt yields on the short end are set by the Fed. Long yields are "set by the market" based on inflation fears, and mostly guessing what the Fed will set rates to over the next 10+ years. Japan had way higher Debt-to-GDP for decades, yet the long term yields were low. Why? The central bank said "we anticipate yields to be set low for a long time" and did so for a long time. Recently they said they are going to "respond to inflation" like all other central banks and suprise, surprise the long end is creeping up. "Bond vigilantes" came into existence as soon as the central bank changed their policy.
- nostrademons 1mo ago
  The inflation fears are part of the vicious cycle. The typical mechanism by which a government would get rid of inconvenient amounts of debt denominated in their own currency is to monetize it and inflate it away. Bond purchasers know about this, and build inflation expectations into the interest rates they are willing to accept. This increases the amount of interest the government has to pay, which makes its financial position even more precarious, which builds in future expectations of either a default or a soft-default through inflation, which pumps interest rates even more. It is possible to break this cycle, but it requires getting spending under control. As long as you operate in deficit, it requires finding private capital to finance future operations of the government. That private capital will require interest commensurate with the expected future devaluation of its principal to lend; otherwise they are just suckers. If you can bring spending into balance then you can hike rates and bring inflation under control and you'll be somewhat insulated from what bond purchasers are willing to accept, but if you can't then increases in rates just increase government spending as well. Japan operated at extremely high levels of debt-to-GDP because their deflationary trap turned all major Japanese corporations into large net savers. Why would you hold debt when you have to pay it back in more valuable yen in the future? That created a very large oversupply of private capital, which crowded into government bonds as the spender of last resort.

whatever1 1mo ago

It is like watching on repeat the EU imploding from the debt crisis in 2009. The only difference is that the US can inflate away their debts and the world will keep buying the usd. The EU had to impose strict austerity, and essentially all the banks stopped providing any liquidity to businesses. Entrepreneurship and research just died overnight.

mono442 1mo ago
The EU didn't have to impose strict austerity. It was just the policy they went with and it ended up being worse than what the US did in the financial crisis.

dhab 1mo ago

So what should those in the US and overseas do? Buy things and hoard before they get expensive? Buy gold? Something else? Taking a loan might be bad.

arionhardison 1mo ago
Organize
nostrademons 1mo ago
Higher interest rates basically mean that asset prices will crash, at least in real terms. The value of an asset is the discounted value of all future cash flows; as the discount rate goes up, the value goes down, particularly for assets (like AI stocks) where the cash flows are far in the future. Unfortunately the right asset to hold depends on why rates are going up. If you believe that rates are going up because we're in for high inflation rates ahead and so bondholders need to be compensated for expected face-value depreciation, then you should buy hard assets (gold, oil, Bitcoin) or stocks that generate a lot of cash now (utilities, FANGs, commodity producers like oil companies). But if you believe that rates are going up because the Fed is going to hike rates and get inflation under control, the right asset to hold is cash. Every other asset will lose value as rates go up and cash becomes scarce, and then you can pick them up cheap when we get the inevitable steep recession.
- Ancalagon 1mo ago
  So buy stocks. Got it.
- glaslong 1mo ago
  And if you believe a rate hike will happen but fail to control inflation due to various trade wars and hot wars, while stocks go down due to large correction on a small number of companies who accounted for most of the growth metrics...?
  - nostrademons 1mo ago
    Then you have to time the market. Cash or short-term treasuries right now, moved into long-term treasuries when rates finished going up, moved into stocks when the economic damage becomes apparent. Getting the timing right is left as an exercise for the reader.