The following article and series of charts / graphs should scare the living day lights out of you, if you don’t already have a general idea how artifically low interest rates and the “U.S debt situation” fit together.
Shocking when you consider that net interest costs will double in five years, and triple in eight.
So…….The Fed is gonna hold rates at zero forever then?
Impossible.
Not saying you may be wrong, I wouldn’t dare, but Japan hasn’t done too bad keeping rates low for quite some time now
No question….and you bet.
But can The U.S afford to go the road of Japan? 15 years of essentially going nowhere?
Damn thing is….Japan is such a unique example as their demographics / situation is so different than that of The U.S.
Looking at Japan as a “model” (after countless currency interventions and now the biggest QE on Earth ) I can’t imagine “any country” looking to go that route but…..
Perhaps we “are indeed” in the NEW NORMAL here….and The Fed will just keep kicking the can.
I imagine something “larger than The Fed” will come along and knock the wind out of this thing regardless.
They don’t control the bond market….not in the slightest.
Great stuff man…appreciate the input.
My only concern with this general consensus view, is that it ignores other countries. The fact that pretty much all are in the same boat today (admittedly with different technicalities, I’m lumping both sovereign and corporate debt here), would suggest to me that the US bond market can’t be knocked without a much larger knock-on effect onto other countries. The other primary aspect, imho, which is often neglected in discussions is that the US remains the only capital market capable of absorbing massive flows. Until this changes, I find it hard to see a bond sell-off of a large magnitude occurring in the US. For this reason, the only scenario I can envisage is a global monetary crisis which is not as improbable as many believe. it has happened many times before….
Im with you as EU concerns can easily jump to the front page anytime soon..and indeed create something “global”.
Left “solely to their own” I’m sure The U.S can keep the boat afloat through one program or another…but as you’ve suggested – this is “global” so…..a domino falls….and many fall in turn.