8 ms·

Finally some evidence that the system is working. Most countries are borrowing like there's no tomorrow, so obviously rates should go up to compensate the risk

Finally some evidence that the system is working. Most countries are borrowing like there's no tomorrow, so obviously rates should go up to compensate the risk of not paying back.

rob74 18d ago
One contributing factor might be that AI companies are raising money via (amongst other methods) also issuing bonds, which might compete with government bonds.
- AnimalMuppet 18d ago
  [dead]
HappySweeney 18d ago
It isn't the debt levels that are causing the rates to spike, rather the start of the emerging Bretton Woods III era.
- AnimalMuppet 18d ago
  Could you be a bit more specific about what you think "Bretton Woods III" is?
  - sph 18d ago
    Not sure what GP meant, but I found this googling that term: https://static.bullionstar.com/blogs/uploads/2022/03/Bretton-Woods-III-Zoltan-Pozsar.pdf https://static.bullionstar.com/blogs/uploads/2022/03/Bretton...
    - HappySweeney 18d ago
      This is indeed what I meant.
glimshe 18d ago
And the incredible thing is that yields are quite low based on historical standards. The risk of lending to most countries at yields that are barely above real inflation is massive for portfolio growth. 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!
- solatic 18d ago
  > 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.
- zeroonetwothree 18d ago
  Apart from a brief period (which also had higher inflation) yields were more like 6% in thr 90s.
- mono442 18d ago
  Yields depend the most on the central bank interest rate. The interest rates are still quite low compared to the past.
method_capital 18d ago
Working is an interesting term (which I agree with btw) because place like Japan with debt at 200%+ of gdp, rates rising are going to annihilate spending in other important areas. Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
- lordnacho 18d ago
  > Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly? 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?
  - bradleykingz 18d ago
    conservatives?
    - verelo 18d ago
      Is that a joke? Seriously. I don't see any conservative remaining, and it's been a while.
      - tdhz77 18d ago
        It had to be a joke. Conservative policies have made things much worse. It’s hard to believe they have a party that gets 60 million people to vote for them.
        CursedSilicon 18d ago
        Never underestimate the power of the fourth estate
    - willy_k 18d ago
      Response to sister comment: conservatism, and the groups that claim to support it, are separate. Same with liberals, and socialists, and the Democrat Party.
whatever1 18d ago
There is 0 risk to getting repaid from the US. We will print for the lenders the exact amount they are promised. Promises kept. All is good
- andrewmutz 18d ago
  Printing money causes inflation and inflation causes increasing interest rates. It is possible to enter a positive-feedback cycle, and has happened to countries before. 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.
- llm_nerd 18d ago
  I feel like there is an inside joke here, so I apologize if I am being a bit spectrum-y taking it at face value. 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.
  - ajross 18d ago
    > the US is catastrophically indebted 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.
epistasis 18d ago
If you loan the person that prints dollars their own dollars back, there's really zero risk of not getting paid back because they can always print dollars and pay you back. The risk is inflation, same as any currency out there. 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...
- toomuchtodo 18d ago
  The debtor inflating the debt away is a soft default, even if not a mechanical "true" default of not making a payment. 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.
  - epistasis 18d ago
    Well just as bad for international lenders as inflation is the devaluation [1] that Trump intentionally caused. We have the worst deficits ever, zero appetite for even acknowledging that the record deficits exist, and only massive plans for double digit percentage increases in the deficit on the tab (e.g. increasing military spending to $1.5T from $1T/year) It was a mad strategy to 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. [1] https://www.morganstanley.com/insights/articles/us-dollar-declines https://www.morganstanley.com/insights/articles/us-dollar-de... 2025 article, in 2026 this has been lessened due to the inflation
    - toomuchtodo 18d ago
      There is no way to grow the US economy due to structural demographics except immigration levels the US electorate is unwilling to accept. We have long ago exceeded the debt we could accumulate based on the future growth curve inherent to the prime working age cohort. 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 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 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-shows-more-counties-see-population-drops-in-immigration-crackdown https://www.bloomberg.com/news/articles/2026-03-26/us-census... | https://archive.today/OGwWj 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-immigration-crackdown-could-shrink-us-population-for-first-time https://www.bloomberg.com/news/articles/2026-01-30/trump-imm... | https://archive.today/LdA0d 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-strategists-see-us-stocks-lagging-all-peers-next-decade https://www.bloomberg.com/news/articles/2025-11-12/goldman-s... | https://archive.today/aINUx https://archive.today/aINUx - November 12th, 2025 (think in systems)
smallmancontrov 18d ago
The system was always working, ZIRP was the market screaming that it had more capital than things to do with the capital. Of course, thinking about this too hard quickly leads to the idea of rolling back some of the enormous tax and policy privileges granted to capital, so it was critical for us to not think about it too hard.
- logicchains 18d ago
  "Capital" gets tax privileges to encourage investing, because investing creates things, consumption destroys things. We want more of the former than the latter.
  - __alexs 18d ago
    You want supply to exceed demand? That doesn't seem very sustainable.
  - lukifer 18d ago
    > investing creates things Predatory private equity. Unproductive rent-seeking. Anti-competitive "acquihires". > consumption destroys things Health care. Education. Selling/renting unoccupied housing.
  - caconym_ 18d ago
    Sounds like a self-fulfilling prophecy. If you draw a line between capital and consumers, and the latter are so tightly squeezed as a result of the "privilege" imbalance that they can barely afford housing, health care, child care, etc., how do you expect them to engage in entrepreneurship? How do you expect them to efficiently allocate their labor? Meanwhile we see an absurd consolidation of capital that leaves consumers with fewer and fewer choices for basic products and services, allowing capital to make those products and services worse and more extractive. Rinse and repeat. The contempt for consumers and attitude that capital should be "privileged" manifests in our government's total indifference to the former's plight, despite the well known fact that they are the engine of our economy. How do you think it's going?
- sfblah 18d ago

Finally some evidence that the system is working. Most countries are borrowing like there's no tomorrow, so obviously rates should go up to compensate the risk of not paying back.

rob74 18d ago

One contributing factor might be that AI companies are raising money via (amongst other methods) also issuing bonds, which might compete with government bonds.

AnimalMuppet 18d ago
[dead]

HappySweeney 18d ago

It isn't the debt levels that are causing the rates to spike, rather the start of the emerging Bretton Woods III era.

AnimalMuppet 18d ago
Could you be a bit more specific about what you think "Bretton Woods III" is?
- sph 18d ago
  Not sure what GP meant, but I found this googling that term: https://static.bullionstar.com/blogs/uploads/2022/03/Bretton-Woods-III-Zoltan-Pozsar.pdf https://static.bullionstar.com/blogs/uploads/2022/03/Bretton...
  - HappySweeney 18d ago
    This is indeed what I meant.

glimshe 18d ago

And the incredible thing is that yields are quite low based on historical standards. The risk of lending to most countries at yields that are barely above real inflation is massive for portfolio growth. 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!

solatic 18d ago
> 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.
zeroonetwothree 18d ago
Apart from a brief period (which also had higher inflation) yields were more like 6% in thr 90s.
mono442 18d ago
Yields depend the most on the central bank interest rate. The interest rates are still quite low compared to the past.

method_capital 18d ago

Working is an interesting term (which I agree with btw) because place like Japan with debt at 200%+ of gdp, rates rising are going to annihilate spending in other important areas. Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?

lordnacho 18d ago
> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly? 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?
- bradleykingz 18d ago
  conservatives?
  - verelo 18d ago
    Is that a joke? Seriously. I don't see any conservative remaining, and it's been a while.
    - tdhz77 18d ago
      It had to be a joke. Conservative policies have made things much worse. It’s hard to believe they have a party that gets 60 million people to vote for them.
      - CursedSilicon 18d ago
        Never underestimate the power of the fourth estate
  - willy_k 18d ago
    Response to sister comment: conservatism, and the groups that claim to support it, are separate. Same with liberals, and socialists, and the Democrat Party.

whatever1 18d ago

There is 0 risk to getting repaid from the US. We will print for the lenders the exact amount they are promised. Promises kept. All is good

andrewmutz 18d ago
Printing money causes inflation and inflation causes increasing interest rates. It is possible to enter a positive-feedback cycle, and has happened to countries before. 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.
llm_nerd 18d ago
I feel like there is an inside joke here, so I apologize if I am being a bit spectrum-y taking it at face value. 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.
- ajross 18d ago
  > the US is catastrophically indebted 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.

epistasis 18d ago

If you loan the person that prints dollars their own dollars back, there's really zero risk of not getting paid back because they can always print dollars and pay you back. The risk is inflation, same as any currency out there. 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...

toomuchtodo 18d ago
The debtor inflating the debt away is a soft default, even if not a mechanical "true" default of not making a payment. 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.
- epistasis 18d ago
  Well just as bad for international lenders as inflation is the devaluation [1] that Trump intentionally caused. We have the worst deficits ever, zero appetite for even acknowledging that the record deficits exist, and only massive plans for double digit percentage increases in the deficit on the tab (e.g. increasing military spending to $1.5T from $1T/year) It was a mad strategy to 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. [1] https://www.morganstanley.com/insights/articles/us-dollar-declines https://www.morganstanley.com/insights/articles/us-dollar-de... 2025 article, in 2026 this has been lessened due to the inflation
  - toomuchtodo 18d ago
    There is no way to grow the US economy due to structural demographics except immigration levels the US electorate is unwilling to accept. We have long ago exceeded the debt we could accumulate based on the future growth curve inherent to the prime working age cohort. 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 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 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-shows-more-counties-see-population-drops-in-immigration-crackdown https://www.bloomberg.com/news/articles/2026-03-26/us-census... | https://archive.today/OGwWj 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-immigration-crackdown-could-shrink-us-population-for-first-time https://www.bloomberg.com/news/articles/2026-01-30/trump-imm... | https://archive.today/LdA0d 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-strategists-see-us-stocks-lagging-all-peers-next-decade https://www.bloomberg.com/news/articles/2025-11-12/goldman-s... | https://archive.today/aINUx https://archive.today/aINUx - November 12th, 2025 (think in systems)

smallmancontrov 18d ago

The system was always working, ZIRP was the market screaming that it had more capital than things to do with the capital. Of course, thinking about this too hard quickly leads to the idea of rolling back some of the enormous tax and policy privileges granted to capital, so it was critical for us to not think about it too hard.

logicchains 18d ago
"Capital" gets tax privileges to encourage investing, because investing creates things, consumption destroys things. We want more of the former than the latter.
- __alexs 18d ago
  You want supply to exceed demand? That doesn't seem very sustainable.
- lukifer 18d ago
  > investing creates things Predatory private equity. Unproductive rent-seeking. Anti-competitive "acquihires". > consumption destroys things Health care. Education. Selling/renting unoccupied housing.
- caconym_ 18d ago
  Sounds like a self-fulfilling prophecy. If you draw a line between capital and consumers, and the latter are so tightly squeezed as a result of the "privilege" imbalance that they can barely afford housing, health care, child care, etc., how do you expect them to engage in entrepreneurship? How do you expect them to efficiently allocate their labor? Meanwhile we see an absurd consolidation of capital that leaves consumers with fewer and fewer choices for basic products and services, allowing capital to make those products and services worse and more extractive. Rinse and repeat. The contempt for consumers and attitude that capital should be "privileged" manifests in our government's total indifference to the former's plight, despite the well known fact that they are the engine of our economy. How do you think it's going?
sfblah 18d ago