OT: American Politics

[MindzEye]

What does this mean? I'm not a doctor like presto

Government debt is getting more expensive (they're having to provide borrowers with higher interest), which means that debt buyers (central banks, fund managers, etc) see it as higher risk...but there's a double whammy to it for a country with particularly large debts, as they have to pay the interest on bonds out of general revenues, so if you're paying more to service your bonds, you have to less to do other government stuff with, or you have to raise taxes.

 

[zeke]

View: https://x.com/daddyhope/status/1925263600962158649

 

[zeke]

View: https://x.com/amitisinvesting/status/1925241383973011968

 

[lecoqsportif]

Government debt is getting more expensive (they're having to provide borrowers with higher interest), which means that debt buyers (central banks, fund managers, etc) see it as higher risk...but there's a double whammy to it for a country with particularly large debts, as they have to pay the interest on bonds out of general revenues, so if you're paying more to service your bonds, you have to less to do other government stuff with, or you have to raise taxes.

And the value of safe harbour goes up, moving marginal dollars out of risk equity.

See post above.

 

[CH1]

What does this mean? I'm not a doctor like presto

I just know the basics

Governments need money to provide services

They get the money they need to spend by selling bonds by promising a small interest rate. The bonds are backed by the government so they are considered very safe.

When economic things are looking good, they can promise a low yield (ie 4%) and bond investors will snap them up.

If investors demand more of a yield for their investment (because they’re less sure about the state of your country)….let’s say today’s 5%….that has an enormous impact because that extra percent (5vs4) means that the government is now facing a 25% hike in interest payments.

And institutions who have billions in the stock market today might be tempted to pull their money out of stocks and be happy with earning 5% without any risk…creating pressure on stock market prices

 

[zeke]

View: https://x.com/mattyglesias/status/1925308754397901024

 

[MindzEye]

This is how people wake up one morning, head out to buy some groceries, swing by an ATM because they need cash and the ATM is empty. So is the one across the street, and the one at the gas station down on the corner, and all 3 of the others a block over.

 

[zeke]

View: https://x.com/SpencerHakimian/status/1925330774196122101

 

[MindzEye]

If investors demand more of a yield for their investment (because they’re less sure about the state of your country)….let’s say today’s 5%….that has an enormous impact because that extra percent (5vs4) means that the government is now facing a 25% hike in interest payments.

and this is particularly important in the US context, because every .01% of increase, costs an additional 4 billion to service. So go up a single percentage point from 4% to 5% and your annual cost to cover the US national debt just went up by 400 Billion dollars, or just under half of the Pentagon's budget.

 

[MindzEye]

View: https://x.com/SpencerHakimian/status/1925330774196122101

It's cool, the bond market is woke.

 

[worm]

I just know the basics

Governments need money to provide services

They get the money they need to spend by selling bonds by promising a small interest rate. The bonds are backed by the government so they are considered very safe.

When economic things are looking good, they can promise a low yield (ie 4%) and bond investors will snap them up.

If investors demand more of a yield for their investment (because they’re less sure about the state of your country)….let’s say today’s 5%….that has an enormous impact because that extra percent (5vs4) means that the government is now facing a 25% hike in interest payments.

And institutions who have billions in the stock market today might be tempted to pull their money out of stocks and be happy with earning 5% without any risk…creating pressure on stock market prices

Thanks

So up is bad because then govt is paying more interest

 

[zeke]

View: https://x.com/esjesjesj/status/1925338503694467256

 

[Pwner]

This is how people wake up one morning, head out to buy some groceries, swing by an ATM because they need cash and the ATM is empty. So is the one across the street, and the one at the gas station down on the corner, and all 3 of the others a block over.

Well it is a good thing that we are now in a cashless society, duh. lol.

 

[hockeylover]

View: https://bsky.app/profile/nycsouthpaw.bsky.social/post/3lppa3z6qfs2f

 

[zeke]

View: https://x.com/MarkWarner/status/1925292122665619579

 

[CH1]

and this is particularly important in the US context, because every .01% of increase, costs an additional 4 billion to service. So go up a single percentage point from 4% to 5% and your annual cost to cover the US national debt just went up by 400 Billion dollars, or just under half of the Pentagon's budget.

Exactly, they’ve maxed out the credit cards…. This has been going on for decades and the doomsday crowd has been waiting for the chickens to come home to roost

Are they right this time? Who knows?

But the anxiety is strong right now.

Look at the price of gold

 

[worm]

and this is particularly important in the US context, because every .01% of increase, costs an additional 4 billion to service. So go up a single percentage point from 4% to 5% and your annual cost to cover the US national debt just went up by 400 Billion dollars, or just under half of the Pentagon's budget.

And the tariffs don't cover the increase?

 

[MindzEye]

Well it is a good thing that we are now in a cashless society, duh. lol.

Still 20% of transaction volume, that are reported of course, so that number is probably quite a bit higher.

Banks just straight up freezing account access would be the next step after that fwiw. The credit markets freezing up is what TARP in 2008 was about. If Banks won't/can't lend to each other, they'll freeze customer assets.

 

[CH1]

Thanks

So up is bad because then govt is paying more interest

Yep. Kind of like if word was out that you were a bad driver (you can tell us, it’s a safe space here) you would have to pay more for insurance

 

[MindzEye]

Exactly, they’ve maxed out the credit cards…. This has been going on for decades and the doomsday crowd has been waiting for the chickens to come home to roost

Are they right this time? Who knows?

But the anxiety is strong right now.

Look at the price of gold

View attachment 27059

They're right this time, but for the wrong reasons because of course they are. The US could have wandered down the path of keynesian economics for as long as they wanted to as long they remained stable and prosperous. It took a fucking kleptocrat to come in and start swinging a 20lb sledge around to detonate the tank of fuel that's been sitting quietly in the room the entire time.