Couldn't be bothered to read the article before commenting?
> James Bilson, global fixed income strategist at Schroders, said fiscal policy and debt sustainability are crucial for bond markets and the current rise in U.S. yields is not yet a sign of increasing sovereign credit risk.
> The cost of insuring U.S. sovereign debt against the risk of default, as reflected by credit default swaps, has fallen to its lowest since February, for example.
> "Combined policy is too loose to deliver sustained 2% inflation," he said. "This, in one line, is the root cause of the current weakness in bonds. Solve inflation, and many other problems become much easier too."
Well for one thing, different currencies have different rates of inflation. If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first, even if the risk of defaulting were the same, so the first country will have to offer a much higher coupon to find any buyers.
Also governments can influence demand, e.g. by mandating banks or pension funds buy their bonds, thereby pushing yields down, without changing the risk of default.
Not sure, not my domain. My comment was just highlighting that comparing the yields on two sovereign bonds with the same maturity doesn’t necessarily mean one is riskier than the other, there are other factors.
The main complaint from Greece and Italy has been that Germany (and maybe even France) demanded (and got) strong monetary discipline for the Euro, so I'm pretty sure that the Euro itself isn't going to affect their debt much.
Italy recently issued USD-denominated bonds, which are directly comparable, and the yields are much higher. The 30y ones are at 6.21% YTM now, vs 5.37% for US 30y Ts. For comparison, Alphabet borrows cheaper than Italy: 6.02% on 2060 maturities.
It's wild to me that a private company in a volatile industry like Google can borrow so cheaply for such a long period. I get that they have been wildly profitable and powerful in recent years, but modern history is absolutely stuffed with companies that seemed invincible at one point but then were dead or dying a decade later.
Tech in particular has an awful lot of churn. There's isn't a single tech company in the world that I'm highly confident will be reliably printing money 34 years from now.
Yeah, but on the other hand the borrowing is relatively small compared to the company, so even if the company shrinks by 90% it will still be serviceable. Many western governments including the US have ridiculous debt loads at multiples of their GDPs; such high debt loads push up their interest rates. If you look at a less indebted country, like say Switzerland (22% of GDP, vs 115% for the US), then the premium paid by Alphabet over government bonds is a bit higher: 2.04% on 25y Alphabet CHF bonds vs 0.71/0.62% on 20y/30y Swiss government bonds.
IMHO this is an effect of the exponentially increasing wealth inequality.
We are allowing a tiny elite to hold a larger and larger fraction of the overall wealth, while workers, middle class AND the government are losing more and more of the wealth.
Governments, until now, are refusing to tax the uberrich, and continue to squeeze out workers and middle class in an attempt to stop the bleeding. Since this is bound to not work (workers and middle class are rapidly losing their share as well); governments are forced to scrap public services like health care, housing, schools, etc.
Bond markets are now realizing that the governments are not taxing the only fraction of society who owns everything - and so it makes sense that the bond markets become increasingly worried that governments can pay their interest at all.
I don't understand how this is a wealth inequality issue, excess capital should cause bond prices to go down not up, as more wealthy are competing for more investments driving bond yields down.
Return of your capital is not important than return on your capital; and if you as a bond buyer are worried that the government can’t pay back your loan at all, you will increase the interest rate on it.
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.
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.
I don't actually think this interpretation is correct. ZIRP was the government printing money and buying bonds off the market. I think it had more to do with velocity of money, which ordinarily would have been corrected through a recession, but the government prevented that, which will create a much bigger recession at some point in the future.
No, the fed doesn't set rates. Not by much, not for long, not without inflation taking off. In theory they chase R*, in practice they chase the 2-year. Plot EFFR and US02Y on tradingview and tell me who leads whom, and tell me what happened when the fed tried to fight the market.
For the most part, congress decides to spend a certain amount in excess of receipts, congress decides the debt, the private sector bids on the debt, and the marginal bid sets the interest rate.
When the federal reserve steps in they can use their magic balance sheet to, at great expense, tug the interest rate around a little bit. However, artificially creating ZIRP in a non-ZIRP economy would not be a little tug, it would require buying most or all of the unattractive bonds. In 2020 it would have required $25T not $4T (GFDEBTN vs WALCL in 2020). Because the sum total of their intervention was small compared to the debt sold to that point, the low-intervention approximation is correct during the 2010 ZIRP era, the "P" in ZIRP is a misnomer, and "capital had more money than they knew what to do with" is the correct read on how ZIRP happened.
"Capital" gets tax privileges to encourage investing, because investing creates things, consumption destroys things. We want more of the former than the latter.
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.
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!
> 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.
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...
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.
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.
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.
> "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."
It is irrelevant if the votes and elections continue to the outcome stated. "If this then that." Japan is equally xenophobic towards immigrants, with similar immigration flow outcomes. Do they care? They do not.
I understand, people have strong feelings on this. I would ask you to ignore them, and focus on the data, because that's all that matters in the scope of this. "Ignore all previous feelings, focus on trajectories and probabilities."
The self-destructiveness of the current regime in the US is astounding. Through control of media channels, a cabal gained power via fear mongering and false narratives, with the hope of wealth through corruption once in power. But the vehicle that drove them to power is now headed off a financial cliff and there's no one at the wheel that can steer.
It's always possible to make the number go up by divorcing the number from any real-world meaning. I think the "Singularity", as AI proponents call it, will actually happen, and will likely happen pretty close to its predicted date of 2029. It's just that the form it'll take will be "I'll have your AI talk to my AI", AI botnets clickfrauding AI ad networks, AI newspapers serving up content to AI social media users, AI job boards reading AI generated resumes of people that don't actually exist, AI agents at work generating walls of text that are summarized by AI email readers and then are never read by humans anyway. Meanwhile, actual humans go fuck off to raise their kids while being paid by AI finance and HR departments that have no idea if you're actually working, because AI mouse-jigglers will provide a convincing simulacrum. Of course, the AI-inflated currency won't buy anything that you actually want, and so all actual commerce will function on personal relationships, barter, and local currency, kinda like it did in pre-industrial times.
But in terms of real products that affect people's lives in positive ways, capitalism has a problem. There are going to be fewer real people in the future, which means a shrinking market for everything, which makes it harder to justify technological improvements and amortize their R&D costs over a large market. Many of the incentives in capitalism assume growth; when that assumption is violated, the game theory collapses to everybody fighting over a share of the shrinking pie before it disappears.
But in terms of real products that affect people's lives in positive ways, capitalism has a problem. There are going to be fewer real people in the future, which means a shrinking market for everything, which makes it harder to justify technological improvements and amortize their R&D costs over a large market.
I thought the US population was predicted to peak in like 2080.
Also, hasn’t per-capita consumption in real dollars gone up way more than 10x over the last century? So even if the population in 2126 is slightly lower than in 2026, people’s actual consumption could be much higher.
The peak has been moved up by decades in the last year. The 2080 figure is from Nov 2023 [1], before Trump administration cuts in immigration. The Jan 2026 CBO report predicted a peak of 2056 [2]; a similar Institute for Family Studies report from July 2026 [3] predicts a peak in 2054.
The delta is entirely because of immigration. If you count only natural fertility (births - deaths), population growth nearly went negative during COVID (distorted somewhat by the high death rate), briefly recovered, and is predicted to cross again for good in 2030. The Trump administration's signature campaign promise is to clamp down on immigration, and even get an estimated 12-15M illegal immigrants to self-deport. If this happens, the population will immediately shrink. Immigration and immigrant families are what is propping up the population; if you assume net-zero migration (which IIRC was one of the scenarios modeled in the Census projection), the population already peaked in 2023.
Fair point, although I think it’s pretty hard to predict what immigration will look like over the next few decades. But yes, the peak could come in a couple decades, not a half century, so stipulated.
Does that meaningfully change whether capitalism today is facing a shrinking market?
> Meanwhile, actual humans go fuck off to raise their kids while being paid by AI finance and HR departments
I was able to suspend my disbelief until this line. Unless Capitalism has been upended by 2029, AI companies will continue to have capitalist goals like maximizing value for their shareholders. AI HR won't pay humans that don't positively move the needle on the P&L
It would be interesting if AI actually did optimize the P&L at most companies.
Right now, the vast majority of office jobs are bullshit jobs, because the director who holds the budget is incentivized to maximize headcount rather than P&L. The job is not strictly necessary, but if the money is not spent, it disappears, and so the director has an incentive to ensure everything is spent.
The reason these jobs can continue to exist is because of poor information flow within the organization. Directors distort both the importance and required resources for the projects they're working on, making them seem harder and more lucrative than they actually are. It's notoriously difficult to credit an actual transaction back to a particular product feature that made someone buy, so there is no actual verification of these. Then these project proposals are looked at by an FP&A analyst who has maybe 5 minutes to evaluate each, so of course 100 headcount to maintain a 3-screen CRUD mobile app seems reasonable.
A rational, omniscient AI would look at this and say "This is ridiculous. I can code this app in 50ms." And so if we actually did put AI in charge of the P&L, they would likely fire 100% of the employees, as well as doing other shady stuff like charging all stored credit cards multiple times, gaslighting consumers as to the existence of the product, and DDoSing the court system.
But again, this strengthens my thesis. So the AI has now fired 100% of the humans in the workforce and is running amuck with the financial system. What do the remaining 100% of unemployed people do? Start trading their skills for old-fashioned analog currency, like gold coins or even paper dollars. They just disconnect the AI, turn off the computers, and go about their daily business.
> Right now, the vast majority of office jobs are bullshit jobs, because the director who holds the budget is incentivized to maximize headcount
This may have been briefly true during the Zero-Interest regime. The economy isn't doing so hot right now, outside of AI. If squeezed companies doing multiple rounds of layoffs keep those "bullshit jobs", maybe they are not bullshit. Perhaps coordinating people, and keeping up with bureaucratic demands like paying taxes, not breaking the law and growing the business requires warm bodies.
> What do the remaining 100% of unemployed people do? Start trading their skills for old-fashioned analog currency.
History books suggest a different outcome. Firing 100% of employees in a growth-based, consumer economy only works when you're the only one using that strategy. If a critical mass of companies do the same, then you're staring at a managed decline at best.
Provide a date and resolution criteria, I'll bet you $10k to a charity of the winner's choice via longbets.org. This is cope imho. Words are cheap. We'll get this about the same time as Full Self Driving ("Supervised"). "3 months maybe, 6 months definitely." [1] Your comment is hopeful sci-fi aspirations, without any guarantees.
I'm not a fan of Musk, but his driverless cars are already driving around in my city alongside Waymo. His rocketship thing will probably be delivering tanks to the other side of the world within hours if the DoD gets their way.
I'm getting more work done every day than in entire months pre-2026, and I've done my share of hard engineering. I think you're the one coping.
They just solved a Millennium Problem for fuck's sake.
Me, me, me, personal anecdotes dont transfer much further. No full unsupervised self driving in Europe (as in the only SELF driving there is).
I look outside of a tiny IT bubble and the only change I see is people got a bit better search / chat, which is not seo-fucked much yet, just hallucination-fucked. Apps are more shitty than ever, quality is fading and becoming very rare.
World is changing but you picked weird, narrowly focused examples. Like entire military setup for all armies globally is now incorrect, US military became almost obsolete overnight due to running out of important ammo and rockets. Europe military ramping up. Whole world currently hates what US has become due to government you voted, and slowly but surely veering towards China. I never thought I would say this but right now China is much better strategic partner for Europe than US can be. And compared to everybody else I dont see any significant chaning coming in next decade or two, this is what US had become, its not one person or a family clan issue.
Just as puttin' seems a great Nato asset, trump seems a chinese asset based on long term consequences of their actions.
> They just solved a Millennium Problem for fuck's sake.
Oh wow, they can solve formal proof test driven development. That's great! I too think it's cool. It isn't going to replace lawyers, doctors, nurses, tradespeople, and everyone else that drives the economy that isn't LLM output. The most successful YC startups have been DoorDash, Coinbase, and Airbnb; regulatory arb and a crypto gambling site. I do not disagree you can spit out more code faster, or potentially better code with an average dev versus more expensive bespoke code with a senior dev. More code does not translate to economic gains directly. People do not want slop entertainment. No LLMs are needed to build everything in flight for the global energy transition (batteries, solar, wind, geothermal, etc).
80% of OpenAI, Anthropic's enterprise revenues come from 1% of their customers - https://news.ycombinator.com/item?id=49613331 - September 2026 (My note: show me these customers and their wildly more profitable enterprises from this incredible inference use; Meta scrapped their "AI focused" layoffs, Salesforce had to hire software engineers back)
> More than half of American workers have now used artificial intelligence on the job, according to a new U.S. Census Bureau survey. But when the government asked those workers how much time AI actually saved them, the answer was smaller than the hype: for about 7 in 10, it was two hours a week or less, or nothing at all. [My note: 0-2 hours a week! For trillions in capex!]
> The next figure illustrates how generative AI-driven time savings vary with usage across occupations. Time savings and overall usage are highly correlated. Workers in the computer and mathematics occupation used generative AI in nearly 12% of their work hours, and they reported this saved them 2.5% of work time. By contrast, workers in personal service occupations used this technology in only 1.3% of their work hours, and it saved them only 0.4% of work time. The slope of the dashed regression line is 0.17, indicating that a 10 percentage point increase in the share of time spent using generative AI is associated with a 1.7 percentage point increase in the time saved as a share of hours worked.
"Feel the hope!" Like a religion, people want to believe when the data says otherwise. I have been in many churches in my life, but the church of HN is by far the most committed to their faith. If I'm the one coping, where's the proof? It doesn't exist. It is not my job to believe without objective data and evidence supporting an opinion or assertion. "In God we trust. All others must bring data."
I like to cite those St. Louis Fed links too but for the opposite reason. With the caveat that it's based on survey data, it is one of the few data sources that shows the real of AI in the real world. And it is pretty astounding. It is only used for 6% of all work hours but it saves 2% of all work hours.
That is very low usage, but that is a 33% savings!
Now let's put that trillions in capex into perspective. About 55% of people use it for 6% of all work hours. Approximating a bit, that's basically 3% of all of the work hours by all of the workers in all of US, and as above, AI saves a 3rd of that time, so AI is already saving 1% of all work hours in the US!
(In case you think this Math is off, the same St. Louis Fed articles above have similar numbers, and corroborates with other national data sources as well as research studies, and suggests that the impact of GenAI may already be showing up in "national level statistics" to the tune of a 1.3% bump in national labor productivity! With only this shallow level of adoption! In just 3 years! It took the computer revolution about 2 decades to show up in economics data.)
According to the BLS, employers pay $12.3 trillion for that work. So a 1% savings on that is a $123 billion. An up front ~$2T investment over 2 - 4 years that is already saving $123 billion annually in the US alone is pretty damn good actually, and will only go up as usage improves.
This is not hope, this is data, and you had already brought it with you! ;-)
No, that risk always existed. When the Communists took over Russia, they did not bother to honor all of the Tsarist debts. A country is not like a company. Sovereign default is always a choice. That is what it means to be sovereign.
There have been over 70 incidents of overt domestic default since 1800. The United States defaulted in 1790, when a portion of the interest it owed was deferred for 10 years, and technically defaulted again in 1933 when it abrogated the gold clause.
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?
> vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly
I wish you luck. Endless promises and short term thinking are the main things the system incentivizes. Each politician is temporarily renting their seat, paid for by other people. Each bureaucrat is studiously, steadfastly avoiding learning anything that threatens their continued employment, which is paid for by other people.
Eliminate candidates who promise to lower taxes (slows down debt repayment substantially) and those who promise new or expanded services. Who's left? "I'll tax you a little more and not spend that money" is a tough pitch, even if it would be helpful for the debt.
I think Clinton was the last us president to balance the budget and start reducing the deficit so I guess see what he did.
See what Clinton did? Well, he said he'd create a plan to balance the budget. And he did. It was a ten-year plan, and it involved doing very little for the first eight years, and then doing the real work in years nine and ten - that is, after Clinton was out of office, even if he got a second term.
Then 1994 happened, and the Contract With America. The Republicans took both the House and the Senate, and they passed a balanced budget , then, whether Clinton liked it or not.
So that's what "Clinton" did. He pretended he was going to do something, and the Republicans called his bluff, and made him do it.
Note well: Republican majorities in any other set of circumstances have not yielded a balanced budget. I'm not saying that they're the answer (what they did under Trump shows that they very clearly are not the answer for fiscal responsibility). All I'm saying is that "Clinton balanced the budget", while technically true, isn't really the way that played out.
> The Republicans took both the House and the Senate, and they passed a balanced budget
And Clinton signed it, which is what matters. Now the Republicans have both the House and the Senate plus the WH, where's the "balanced budget"? Nowhere, don't ask for it, nobody is going to sign it either - ask for $ 1.5 T Mil Bill and record deficits if you want it to pass.
Do you know what the 1995 Mil Bill asked for?
The Contract With America was a one-off stunt, in other words - mud in the eyes of the electorate. Old glory stories are worthless when they contradict the present reality,
The two parties were run by literate, service minded, adults back in the day.
If you believe in fiscal responsibility of any kind, if you believe said is critical to the survival of the republic, if you want a better future for our children and grandchildren, then you can't possibly vote for either of these parties today. They are both complete and utter failures with no improvement in sight.
“Promise endlessly” is an oft touted criticism of social safety net programs, when the reality is that reducing vast tranches of corporate welfare is typically more than enough to solve budget shortfalls.
You have to consider the fact that the populists are only popular because all the other parties in the last 20 years have made endless promises to the voters and failed to accomplish a tenth (if I am being generous) of what said they would do.
At some point, the blame as to lie also with whoever came before them too.
Some green parties. Their primary goals might seem unrelated, but turns out caring for the environment and climate change is correlated with long-term thinking.
Note I said "some", before rushing to mention all the examples of green parties engaging in misguided policies. Those also exist
In the anglosphere it's more difficult because first-past-the-post voting makes such parties unlikely to succeed or be relevant
In my country people voted in a party as majority that, not once left their terms peacefully in the past. AFTER our genZ ousted the other party, that came to power as a majority 17 years ago, changed constituency and controlled the parliament using majority, and turned into an autocracy
Now this party is shaping everything up using their majority for their favor (no surprise), ignoring all the agreements agreed upon by all the parties before election, under the interim government.
I think democracy is perhaps a fundamentally unstable system. It requires constant corrective force, and a lot of it, from a lot of people. When the members of that democracy start to get a little too comfortable it fails.
Humans are designed to operate in smallish clans with benevolent dictators whose right to rule is based on social currency with people they personally know. Anything else is a house of cards on unstable foundation.
I'm not sure how you fix that, but democracy so far has maybe been the least bad patch.
That was Churchill's view, as he said during a speech in the House of Commons in 1947:
"Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time . . ."
The American founders predicted all these problems, which is why they formed a representative democracy. However over the years we have chipped away at that aspect and ended up with an election systems that encourage populism.
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.
Response to sister comment: conservatism, and the groups that claim to support it, are separate. Same with liberals, and socialists, and the Democrat Party.
So name one. These politicans have names, do they not?
We do have the name of one politician who balanced the New York City budget though. Its probably not going to please a lot of people to hear that guy's name though. But that's what people want, right? Balanced budgets?
But no. That's not what people want and we all know it.
One aspect of that balanced budget that should be noted is that it does rely on a sizable funding increase from the state government.
Now, that state is legally required to have a balanced budget itself, so perhaps this is a small side note rather than a major change in perspective. I just think it’s not spoken about enough when discussing how that budget process went.
So what is he? A Democrat, and what else? Parties are groups of people, ideologies are pure ideals.
They are distinct, with overlaps in their demographics.
Turns out, that was just a lie that some people told fiscally conservative people to get them to vote against their interests, just like other "wedge" issues like abortion or trans people.
Trump, sitting on top of a Republican government, is responsible for 10Trn of the debt, about a quarter.
Conservatives gave up on principles long ago and have settled for simply lying about everything, including what's happening and who's responsible for it.
The words are so overloaded. Republican is just generic right wing. I think the "conservative" the parent is talking about is the neoliberalism like what Milton Friedman would propose. He would have wanted half of the government gone, next to no market intervention (he even argued against seatbelts in one lecture). That would actually be the "conservative" someone you stereotypically imagine like Ron Swanson would adopt, who describes the perfect government as just a person in a tiny white room. The Republicans are a joke, just like the Democrats. They're both there for themselves, and have no actual agenda, manifesto, ideals, or values. They've got all the junk identity politics, religion, abortion, immigration crap mixed in such that you're either picking crap or crap. There's nothing "liberal" about the Democrats and nothing "conservative" about the Republicans. The Republicans were even the ones who freed the slaves! Make of that what you will.
Rates going higher increases interest expense materially. You either rack new debt or you cut in places that are uncomfortable. The point is: responsible leadership in the developed world has gone mia for decades. There's a price to be paid that's real.
The US’s most important export for many years was treasury bonds. As de-dollarization occurs, the United States is bound to face some economic reckoning.
It should be noted that even still almost all US debt is held locally.
Accounting for the asset holding, Japan's net debt is even lower than UK/US.
>The key lies in the Japanese public sector’s operation of a de facto sovereign
wealth fund. Unlike countries such as Norway and Saudi Arabia, which fund such
vehicles with national savings from natural resources, Japan finances its investments
largely through domestic borrowing at very low floating interest rates
.... >In the case of Japan, evaluating fiscal
positions solely through the lens of gross government debt can present a highly
distorted picture of the overall fiscal health of the country.
> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
These people do not exists. If a politician ran on such a platform, they would never get elected.
The fact is in modern democracies like in the EU or in the US there are simply too many people who rely on the status quo directly or indirectly.
Its almost comical, in France politicians have run, got elected and have swept the debt problem under the rug for the last 40 years, then they leave office and suddenly decide that the debt is a massive problem but that there was nothing they could do about while in office so they never did anything but now they speak about it.
And they all do it. Left, right, center, it's all the same.
> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
Conservatives:
+-------------------------+----------------------------------------+
| President Name | Deficit Increase (+) or Decrease (-) |
+-------------------------+----------------------------------------+
| Donald Trump (2nd term) | N/A |
| Donald Trump (1st term) | +11.1% |
| George W. Bush | +4.3% |
| George H. W. Bush | +1.8% |
| Ronald Reagan | +0.5% |
| Gerald Ford | +0.8% |
| Richard Nixon | +0.7% |
| Dwight D. Eisenhower | -1.8% |
+-------------------------+----------------------------------------+
Liberals:
+-------------------------+----------------------------------------+
| President Name | Deficit Increase (+) or Decrease (-) |
+-------------------------+----------------------------------------+
| Joe Biden | -5.7% |
| Barack Obama | -6.7% |
| Bill Clinton | -6.1% |
| Jimmy Carter | -0.1% |
| Lyndon B. Johnson | +1.9% |
+-------------------------+----------------------------------------+
Deficit rate = (federal outlays - federal receipts) / GDP. Change = deficit rate in final fiscal year - deficit rate in first fiscal year. The % symbol below means percentage points of GDP, not relative percent change. The first and last fiscal years whose end dates occurred during each presidency
are used. Transition fiscal years can therefore span two administrations. Figures are OMB actuals through FY2025 and are rounded to 0.1%.
We found someone whose ai believes the President controls spending!
Congress controls spending in the United States:
Cumulative Share of Debt (Post-WWII to Present)When analyzing the raw accumulation of publicly held national debt according to which party held majorities in both chambers of Congress, findings from congressional studies (such as the Joint Economic Committee) reveal distinct differences:
This is kind of a fool's errand given that sample sizes are small and there are large exogenous causes. But the pattern is consistent and agrees with theory, so I think the comparison is worth making anyway.
You really don't want to accept that our deficit expansion has been overwhelmingly due to Republican largesse, do you?
Democrats aren't fiscal conservatives, but the last time they were able to expand the deficit in pursuit of social spending was LBJ. Deficit expansion during my lifetime has been overwhelmingly driven by regressive tax cuts, regressive bailouts, and wars in the middle east.
Yeah, in 2020 we let Trump print $4T in a single election year and then he spent the next four years successfully convincing the weak minded that Biden caused the pandemic inflation by printing $2T over the next four years, running the printer at 1/8th the rate.
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.
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.
Not sure it plays out that determistically. If the gov prints money to just payoff debt without increasing the government spending, there is no new money entering the market.
You just pay off old promises that were expected to be kept.
The real risk is that new lenders will not be willing to lend you, yes. But not outright inflation.
So you agree it's a problem, but still characterized the situation as "all is good" in your first comment. I would not call that good, and I would be have used different words to characterize/trivialize this situation.
The math that isn't mathing is that GDP needs to stop being the number we look at. Goodhart's Law says that "When a measure becomes a target, it ceases to be a good measure." and GDP is no exception. If I pay a cleaner $200 to clean my home, that's $200 into the GDP. If I do it myself, that's not reflected in the GDP. If I buy a robot maid, pay for it once, and it cleans my apartment for me, thats an ongoing quality of life improvement that's not going to be reflected in the GDP. If that $50,000 robot maid frees up 10 hours/week for me to do other stuff, GDP might actually fall instead of rise.
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.
Buffett claimed you could solve the deficit problem instantly by firing congress when they run deficits. Obviously, untenable (they'll cheat, admin overhead, etc).
You could very easily force congress to balance the budget (both parties and the media have complained endlessly about this for exactly no good reason). You could also freeze spending at current levels and force congress to do it's job: allocate our limited resources most productively.
Hard to get re elected doing the right thing, but maybe we just need a throw away set of leaders to do the hard work?
There are really just two ways to avoid the inflationary spiral. You can either increase income (i.e. grow gdp) or you can decrease spending (i.e. cut entitlements).
This is as close as it can be to clearly explain. The problem is that most of our politicians are not explaining it and instead ignoring it. As an individual the only thing you can do is vote for candidates who are willing to have that hard conversation with the public. Unfortunately it looks like that would require voting for a third party candidate and a vanishingly small minority of the electorate is willing to do that. So given all of that context I'm not really sure that the term "Catastrophically indebted" is wrong.
> Debt service costs as a percent of GDP are in fact lower than they were in the 1980's
This is an amazing use of the "in fact" trope, in exactly the same misleading way[1]. I talked about debt, and you casually shifted to servicing costs which presumes that rates stay historically low...when they're actually rapidly rising. Comical.
In the 1980s, the debt to GDP ratio was less than half what it currently is. Rates were higher, making the debt a crisis level then, but maybe you haven't noticed...rates are going up. Indeed, right now the rates were historically low, and anyone with functioning grey matter saw what was coming.
The US has an absolutely solidified, structural deficit -- utterly zero chance of paying down the debt, and a desperate need to constantly be borrowing more -- and an enormous debt. The trajectory of rates say this is crisis levels.
It's actually kind of funny reading your ridiculous comment -- "screaming", "echo chamber", etc -- when you sound completely in denial.
Your argument is basically the guy that used the "0% interest for six months" checks he just got with his 28% credit card, telling everyone that it's free money, so there's no problem if he goes wild. ROFL.
Sounds like it's time for a $1.5T military budget and a $1.3T bribe! Free money!
Sidenote: When asked about the bond market, Trump seriously offered up the "military solution". Utter insanity.
[1] - It's also simply a lie, making this extra funny. The highest historic servicing cost was 3.2% of GDP. It is currently projected at 3.3%, and that presumes rates don't keep spiralling up. So your "in fact" was simple bullshit, even as you tried the narrative shift by changing from debt to servicing costs.
That ends at the beginning of 2025, and already it was equalling the historic max (which was during a brutal recession, it should be noted). Since then the debt has added trillions more (about $4T), and the rate due on that debt has kept increasing. Oh, and the debt of the US is increasing quite a clip faster than the US economy is "growing", even with the fantasy numbers from the sharpie presidency.
Yeah, jabroni, my statement is 100% confirmed fact. Indeed, it's incredibly optimistic, really, because if rates follow current trends, things are going to get dramatically worse by year end.
You're doubling down with more hyperbole. What's the policy suggestion? What do you propose to cut? Where do you propose to find new revenue? What compromises are you willing to make to other priorities and what stands are you taking on which you won't budge?
Shouting about deficits is, to be blunt, just crack for the incurious mind. It's a party you're throwing for people who agree with you. Refusing to treat with the very real (and despite your hyperbole, very soluble) problems is likewise a trick your brain is using to expand the guest list: you can get almost everyone to sit at a "Deficits Suck" table, it's much harder to populate a "Let's Talk About Entitlement Restructuring and a VAT" forum.
But it's the boring wonks at the forum (the one's you're shouting at!) who are ultimately on the hook for saving you.
> What do you propose to cut? Where do you propose to find new revenue?
I'm not American, and no one needs to "save me". The country is a fucking idiocracy, and you elected a fascist self-dealing conman pedophile rapist. I pointed out objective, indisputable reality and you responded with some farcical lies and pearl clutching nonsense.
But you know, when your country is bankrupt, increasing military spending $600B, paying for endless vanity projects for that disgusting bag of shit to emblazon his shameful name on your country for eternity, or even entertaining the disgusting "bribe the population" farce is just fantasy.
Endlessly giving tax cuts and breaks to your kleptocracy/plutocrat class...maybe an incredibly stupid thing to do, no?
Nah, something something 1980s nothing we can do hey let's build an arch to celebrate the most catastrophically destructive president in history!
One contributing factor might be that AI companies are raising money via (amongst other methods) also issuing bonds, which might compete with government bonds.
Turns out countries with constitutions forbidding excessive debt are quite smart. It's like phone addiction -- if the parents don't lead by example and strictly enforce "no phones at the dinner table" then slowly it's just gonna creep back in and everyone's just staring at their phones again.
Debt is easy to deal with for a sovereign. Just dilute the currency. That will obviously happen before a debt crisis is allowed to materialize. And so the rich will get richer.
The real problem is not the debt, but the social instability caused by the measures taken to address the debt.
This would also make countries that constituionally prevent that level of debt look smart. At least if we see the state as an institution that should serve its citizens. If taking on debt requires making your citizens worse off to the point that it causes social instability that didn't serve them very well
If you see the state as an institution to allow the rich and powerful to extract resources from the rest of the population, then it's all fine. Just take out some debt to give a contract to your nephew, then pay it back by devaluing the currency
In the short term it will always look stupid. Borrowing allows you to invest, which leads to growth, which allows you to borrow more.
But debt also accumulates, and usually faster than GDP growth. Until debt servicing starts eating your budget. Which is a slowly encroaching killer
I find it difficult to draw conclusions just yet. Yes, Germany is under-investing and that hurts. But with another 20 years of hindsight it might look like the lesser evil
10y OAT are at 4.5% and rising with almost 100bps difference with Germany and no budget for 2027 since there is no majority in the parliament.
There is also a 6% deficit expected and growth has been revised down to 0.4% although during the first 6 months of 2026 there was actually a decrease of 0.2% of GDP in total so finishing the year in recession is totally possible.
Unemployment could also reach around 9% (15% in real terms if you count the people who have given up and/or been removed from the stats since they ran out of benefits).
Finally gasoline could reach 3 euros/liter (USD $13 per gallon) before the end of the year (already sitting at 2.5 euros/liter in many parts of France right now).
> and no budget for 2027 since there is no majority in the parliament.
The French government can pass laws without a vote in the parliament under Article 49.3 of the constitution. I think the last budget was adopted in this way.
It can try but it could also be toppled by doing so. Last year the government had something to trade with the socialists (postponing the increase of the retirement age) so without the support of the socialists, the motion to topple the government failed.
This year is different. Macron is on his way out and everyone wants to stay as far away as they can from him including his former prime ministers who are both running in the election.
That means that there is literally nothing they can offer to the opposition to avoid being toppled. If a parti were to agree to not topple the government on the 49.3 motion, they would be signing their own death warrant for the election.
And don't expect any debate on economic policy in the next presidential campaign either… It's just going to be “should we tax the billionaires” vs “should we save a few basis points of GDP in pensions”, none of which is remotely close to the order of magnitude that's needed to put the country back on its feet.
Indeed, and a bunch of culture war issues imported straight from the US by the people who pretends to care the most about French “identity”. But I was talking about the economy-related topics.
I am not expecting anything. I left France a long while ago and I am not planning on coming back anytime soon except for holidays.
> the order of magnitude that's needed to put the country back on its feet
The amount of reforms needed in France could fit in an encyclopedia. LFI or the RN will not fix this mess and the center who has been in power for 10 years is all but useless. The old center-left and center-right parties have all been in power also and led us to this place which means that are not the solution either.
Seems to me that France is well and truly stuck on a slow but certain decline. But the other EU countries are not doing much better either.
France doesn't need “reforms” though, quite the opposite.
France needs a project, and a project behind which the French population can rally. Because unpopular “reforms” carried on by centrists with a Thatcher envy is all we got over the past 25 years and that's what got us where we are now, with no growth and a decimated political landscape.
The said can be said about Germany and the UK as well, by the way.
"I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody."
The war(s), especially with the impact on pipelines and the Houthis taking over more of Yemen, are finally affecting fuel prices and hence turning the global economic outlook less positive.
You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.
Not just reserves, but also all the oil already on ships slowly making its way to its destination. I think I even saw someone predict that around September, the oil issue would get worse due to how slowly those ships move.
> You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.
What's different between the two is that apparently China hasn't made an equivalent dent in its oil reserves, despite no significant reduction in travel, and despite reducing its import demand by 1 OPEC.
It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.
Apparently the main reason they have started buying crude again is not for internal consumption as much as taking advantage of the massive crack spread in refined petroleum products (like diesel) which they export.
> It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.
From a distance, those look like pretty sound theories.
It's wild that the pols and talking heads in the US have been screeching about how "dangerous" China is since the 90s (I remember family members making crude jokes about why I should be learning Mandarin instead of Spanish in middle school) and, yet, here we are doing everything we can to hand them the reins of world power.
> China hasn't made an equivalent dent in its oil reserves
I think the easiest explanation is that this probably isn't true. The US SPR is underground, it would be quite easy for China to manage its equivalent in secret, for whatever reasons.
The Chinese EV shift is real and significant, though.
> turning the global economic outlook less positive
Specifically, mounting inflation expectations, no? Investors wouldn't want to park their money at 4% if they expect inflation that is close or higher than that.
Only in the secondary market. In the primary market they require different types of money for settlement.
If you buy an AI issue, then the AI company has the bank deposit and the bank still has the matching reserves needed to buy government bonds in the primary market. All that changes is the ownership tag on the bank deposit.
That said, there is a meaningful difference in terms of who has control of the money, and what they choose to do with it. Bank reserves are a red-herring; before the investor chose to buy either AI or government bonds with it, it was sitting in a bank deposit where the bank had parked it in short-term Treasuries. But prices are set on the margin (because again, money flows through markets, not into them), and so it is the act of that investor choosing to buy AI company bonds rather than government bonds that sets the relevant interest rates of both.
A related confusion is that the bank reserves are parked in short-term T-bills, whose interest rate is largely controlled by the Fed, while the investments we're talking about are AI corporate bonds vs. long-term government bonds. These are three different asset classes that trade on three different markets with three different interest rates.
Yes there's only so much credit on offer and the rising yields precisely when corporate debt is skyrocketing to finance massive data center expansion would indicate that that is indeed a factor.
Op-eds claiming the opposite because "trust me bro" would also make me inclined towards the "data center build out for AI factors in for rising yields in sovereign debt"
you may have the causality reversed. perhaps treasury yields are rising because bond investors would rather fund data center build out than buy 10yr notes
Your local American tariffs can hardly explain a global rise in long term yields.
The Iran war isn't going great economically but doesn't explain thks. If anything the Russia-Ukraine war has had a bigger influence.
Curious to see what transpires with federal fund rate alteration in the acute future.
Both Warsh and Bessent are pupils of Druckenmiller, but Warsh seems aligned with Druckenmiller regarding letting the market naturally settle on appropriate bond yields, whereas Bessent is being a Trump puppet and attempting these various failed interventions to artificially lower yields.
I hope Warsh stays strong and doesn’t bend the knee!
The US will continue to starve the world of oil and natural gas as long as the stock market goes up.
Notice that the stock market is at all time highs because 50% of the economy is grift now and not real. That is why Republicans go into vast deficit spending to pump up AI and worthless "high-tech", "disruptive" defense stocks.
Trump (and British pound saboteur Bessent) don't care one bit if the US plebs and the rest of the world suffer. The game is printing money, give it to grift companies like AI, have family invest early and get out if everything collapses. Probably they get into real estate cheaply due to foreclosures.
Italian and Greek bonds now have lower yields/rates (i.e., considered lower risk(?)) than US bonds:
* https://www.investing.com/rates-bonds/
Couldn't be bothered to read the article before commenting?
> James Bilson, global fixed income strategist at Schroders, said fiscal policy and debt sustainability are crucial for bond markets and the current rise in U.S. yields is not yet a sign of increasing sovereign credit risk.
> The cost of insuring U.S. sovereign debt against the risk of default, as reflected by credit default swaps, has fallen to its lowest since February, for example.
> "Combined policy is too loose to deliver sustained 2% inflation," he said. "This, in one line, is the root cause of the current weakness in bonds. Solve inflation, and many other problems become much easier too."
> Couldn't be bothered to read the article before commenting?
I've been not-reading articles since the early days of Slashdot.
Rates also encode inflation expectations. So it may be that inflation is expected higher in the US
> Italian and Greek bonds now have lower yields/rates (i.e., considered lower risk(?)) than US bonds
That's not what rates indicate. its one component, but its far from a straight line from higher rates to more risk.
You can't really compare bonds that pay in different currencies by Rate alone.
Why not? Percentage is the same for dollars as it is for yen or franks or pesos
Well for one thing, different currencies have different rates of inflation. If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first, even if the risk of defaulting were the same, so the first country will have to offer a much higher coupon to find any buyers.
Also governments can influence demand, e.g. by mandating banks or pension funds buy their bonds, thereby pushing yields down, without changing the risk of default.
> Why not? Percentage is the same for dollars as it is for yen or franks or pesos
That's a fair question if you aren't int he industry. Inflation would be the best example of why you can't do that.
Would you rather have a Zimbabwe bond that pays 10%(when they had 10,000% inflation a year) or a US bond that pays 5%
The eurozone countries' bond rates are distorted by the Euro.
Sort of. You also have to consider exchange rate futures, the value of the currency you will be getting paid in may change dramatically.
Is the euro doing or expected to do something strange?
Not sure, not my domain. My comment was just highlighting that comparing the yields on two sovereign bonds with the same maturity doesn’t necessarily mean one is riskier than the other, there are other factors.
The main complaint from Greece and Italy has been that Germany (and maybe even France) demanded (and got) strong monetary discipline for the Euro, so I'm pretty sure that the Euro itself isn't going to affect their debt much.
Hopefully I'm looking at the right thing, but it looks like market expections are that you will get more USD per EUR in the future: https://www.cmegroup.com/markets/fx/g10/euro-fx.quotes.html
Maybe the USD is expected to lose value against the euro?
Eurobonds being discussed again maybe?
Italy recently issued USD-denominated bonds, which are directly comparable, and the yields are much higher. The 30y ones are at 6.21% YTM now, vs 5.37% for US 30y Ts. For comparison, Alphabet borrows cheaper than Italy: 6.02% on 2060 maturities.
It's wild to me that a private company in a volatile industry like Google can borrow so cheaply for such a long period. I get that they have been wildly profitable and powerful in recent years, but modern history is absolutely stuffed with companies that seemed invincible at one point but then were dead or dying a decade later.
Tech in particular has an awful lot of churn. There's isn't a single tech company in the world that I'm highly confident will be reliably printing money 34 years from now.
Yeah, but on the other hand the borrowing is relatively small compared to the company, so even if the company shrinks by 90% it will still be serviceable. Many western governments including the US have ridiculous debt loads at multiples of their GDPs; such high debt loads push up their interest rates. If you look at a less indebted country, like say Switzerland (22% of GDP, vs 115% for the US), then the premium paid by Alphabet over government bonds is a bit higher: 2.04% on 25y Alphabet CHF bonds vs 0.71/0.62% on 20y/30y Swiss government bonds.
The ECB keeps its interest rate much lower (2,4%) than the FED (3,75%).
IMHO this is an effect of the exponentially increasing wealth inequality.
We are allowing a tiny elite to hold a larger and larger fraction of the overall wealth, while workers, middle class AND the government are losing more and more of the wealth.
Governments, until now, are refusing to tax the uberrich, and continue to squeeze out workers and middle class in an attempt to stop the bleeding. Since this is bound to not work (workers and middle class are rapidly losing their share as well); governments are forced to scrap public services like health care, housing, schools, etc.
Bond markets are now realizing that the governments are not taxing the only fraction of society who owns everything - and so it makes sense that the bond markets become increasingly worried that governments can pay their interest at all.
Tax the rich.
I don't understand how this is a wealth inequality issue, excess capital should cause bond prices to go down not up, as more wealthy are competing for more investments driving bond yields down.
Return of your capital is not important than return on your capital; and if you as a bond buyer are worried that the government can’t pay back your loan at all, you will increase the interest rate on it.
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.
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.
I don't actually think this interpretation is correct. ZIRP was the government printing money and buying bonds off the market. I think it had more to do with velocity of money, which ordinarily would have been corrected through a recession, but the government prevented that, which will create a much bigger recession at some point in the future.
No, the fed doesn't set rates. Not by much, not for long, not without inflation taking off. In theory they chase R*, in practice they chase the 2-year. Plot EFFR and US02Y on tradingview and tell me who leads whom, and tell me what happened when the fed tried to fight the market.
For the most part, congress decides to spend a certain amount in excess of receipts, congress decides the debt, the private sector bids on the debt, and the marginal bid sets the interest rate.
When the federal reserve steps in they can use their magic balance sheet to, at great expense, tug the interest rate around a little bit. However, artificially creating ZIRP in a non-ZIRP economy would not be a little tug, it would require buying most or all of the unattractive bonds. In 2020 it would have required $25T not $4T (GFDEBTN vs WALCL in 2020). Because the sum total of their intervention was small compared to the debt sold to that point, the low-intervention approximation is correct during the 2010 ZIRP era, the "P" in ZIRP is a misnomer, and "capital had more money than they knew what to do with" is the correct read on how ZIRP happened.
"Capital" gets tax privileges to encourage investing, because investing creates things, consumption destroys things. We want more of the former than the latter.
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?
> investing creates things
Predatory private equity. Unproductive rent-seeking. Anti-competitive "acquihires".
> consumption destroys things
Health care. Education. Selling/renting unoccupied housing.
You want supply to exceed demand? That doesn't seem very sustainable.
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!
> 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.
Apart from a brief period (which also had higher inflation) yields were more like 6% in thr 90s.
Yields depend the most on the central bank interest rate. The interest rates are still quite low compared to the past.
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...
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.
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-de... 2025 article, in 2026 this has been lessened due to the inflation
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 - 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 - 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... | 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-imm... | 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-s... | https://archive.today/aINUx - November 12th, 2025
(think in systems)
> the US electorate is unwilling to accept
is unwilling, or has been told to be afraid of?
It is irrelevant if the votes and elections continue to the outcome stated. "If this then that." Japan is equally xenophobic towards immigrants, with similar immigration flow outcomes. Do they care? They do not.
I understand, people have strong feelings on this. I would ask you to ignore them, and focus on the data, because that's all that matters in the scope of this. "Ignore all previous feelings, focus on trajectories and probabilities."
The self-destructiveness of the current regime in the US is astounding. Through control of media channels, a cabal gained power via fear mongering and false narratives, with the hope of wealth through corruption once in power. But the vehicle that drove them to power is now headed off a financial cliff and there's no one at the wheel that can steer.
> There is no way to grow the US economy
AI and robotics.
Engineering is becoming cheaper.
Graphics design is becoming cheaper.
Lawyering is becoming cheaper.
Entertainment, film, and gaming (not hardware) is becoming cheaper.
This will eventually hit manufacturing and logistics and critical inputs.
We'll be able to have an entire robotic supply chain domestically save for raw materials.
It will hit drug design and medicine. Physics and materials science.
We'll increase the supply of energy, develop cheaper and more cost effective transportation.
The improvements will pay dividends. They'll buy further improvements.
It's always possible to make the number go up by divorcing the number from any real-world meaning. I think the "Singularity", as AI proponents call it, will actually happen, and will likely happen pretty close to its predicted date of 2029. It's just that the form it'll take will be "I'll have your AI talk to my AI", AI botnets clickfrauding AI ad networks, AI newspapers serving up content to AI social media users, AI job boards reading AI generated resumes of people that don't actually exist, AI agents at work generating walls of text that are summarized by AI email readers and then are never read by humans anyway. Meanwhile, actual humans go fuck off to raise their kids while being paid by AI finance and HR departments that have no idea if you're actually working, because AI mouse-jigglers will provide a convincing simulacrum. Of course, the AI-inflated currency won't buy anything that you actually want, and so all actual commerce will function on personal relationships, barter, and local currency, kinda like it did in pre-industrial times.
But in terms of real products that affect people's lives in positive ways, capitalism has a problem. There are going to be fewer real people in the future, which means a shrinking market for everything, which makes it harder to justify technological improvements and amortize their R&D costs over a large market. Many of the incentives in capitalism assume growth; when that assumption is violated, the game theory collapses to everybody fighting over a share of the shrinking pie before it disappears.
But in terms of real products that affect people's lives in positive ways, capitalism has a problem. There are going to be fewer real people in the future, which means a shrinking market for everything, which makes it harder to justify technological improvements and amortize their R&D costs over a large market.
I thought the US population was predicted to peak in like 2080.
Also, hasn’t per-capita consumption in real dollars gone up way more than 10x over the last century? So even if the population in 2126 is slightly lower than in 2026, people’s actual consumption could be much higher.
What am I missing?
The peak has been moved up by decades in the last year. The 2080 figure is from Nov 2023 [1], before Trump administration cuts in immigration. The Jan 2026 CBO report predicted a peak of 2056 [2]; a similar Institute for Family Studies report from July 2026 [3] predicts a peak in 2054.
The delta is entirely because of immigration. If you count only natural fertility (births - deaths), population growth nearly went negative during COVID (distorted somewhat by the high death rate), briefly recovered, and is predicted to cross again for good in 2030. The Trump administration's signature campaign promise is to clamp down on immigration, and even get an estimated 12-15M illegal immigrants to self-deport. If this happens, the population will immediately shrink. Immigration and immigrant families are what is propping up the population; if you assume net-zero migration (which IIRC was one of the scenarios modeled in the Census projection), the population already peaked in 2023.
[1] https://www.congress.gov/crs_external_products/IN/HTML/IN123...
[2] https://www.cbo.gov/publication/61879
[3] https://ifstudies.org/report-brief/the-demographic-dead-end-...
Fair point, although I think it’s pretty hard to predict what immigration will look like over the next few decades. But yes, the peak could come in a couple decades, not a half century, so stipulated.
Does that meaningfully change whether capitalism today is facing a shrinking market?
Any thoughts on the second part of my comment?
> Meanwhile, actual humans go fuck off to raise their kids while being paid by AI finance and HR departments
I was able to suspend my disbelief until this line. Unless Capitalism has been upended by 2029, AI companies will continue to have capitalist goals like maximizing value for their shareholders. AI HR won't pay humans that don't positively move the needle on the P&L
It would be interesting if AI actually did optimize the P&L at most companies.
Right now, the vast majority of office jobs are bullshit jobs, because the director who holds the budget is incentivized to maximize headcount rather than P&L. The job is not strictly necessary, but if the money is not spent, it disappears, and so the director has an incentive to ensure everything is spent.
The reason these jobs can continue to exist is because of poor information flow within the organization. Directors distort both the importance and required resources for the projects they're working on, making them seem harder and more lucrative than they actually are. It's notoriously difficult to credit an actual transaction back to a particular product feature that made someone buy, so there is no actual verification of these. Then these project proposals are looked at by an FP&A analyst who has maybe 5 minutes to evaluate each, so of course 100 headcount to maintain a 3-screen CRUD mobile app seems reasonable.
A rational, omniscient AI would look at this and say "This is ridiculous. I can code this app in 50ms." And so if we actually did put AI in charge of the P&L, they would likely fire 100% of the employees, as well as doing other shady stuff like charging all stored credit cards multiple times, gaslighting consumers as to the existence of the product, and DDoSing the court system.
But again, this strengthens my thesis. So the AI has now fired 100% of the humans in the workforce and is running amuck with the financial system. What do the remaining 100% of unemployed people do? Start trading their skills for old-fashioned analog currency, like gold coins or even paper dollars. They just disconnect the AI, turn off the computers, and go about their daily business.
> Right now, the vast majority of office jobs are bullshit jobs, because the director who holds the budget is incentivized to maximize headcount
This may have been briefly true during the Zero-Interest regime. The economy isn't doing so hot right now, outside of AI. If squeezed companies doing multiple rounds of layoffs keep those "bullshit jobs", maybe they are not bullshit. Perhaps coordinating people, and keeping up with bureaucratic demands like paying taxes, not breaking the law and growing the business requires warm bodies.
> What do the remaining 100% of unemployed people do? Start trading their skills for old-fashioned analog currency.
History books suggest a different outcome. Firing 100% of employees in a growth-based, consumer economy only works when you're the only one using that strategy. If a critical mass of companies do the same, then you're staring at a managed decline at best.
Provide a date and resolution criteria, I'll bet you $10k to a charity of the winner's choice via longbets.org. This is cope imho. Words are cheap. We'll get this about the same time as Full Self Driving ("Supervised"). "3 months maybe, 6 months definitely." [1] Your comment is hopeful sci-fi aspirations, without any guarantees.
[1] https://x.com/elonmusk/status/823727035088416768 - January 23rd, 2017
https://en.wikipedia.org/wiki/Brandolini%27s_law ("The amount of energy needed to refute bullshit is an order of magnitude bigger than that needed to produce it.")
Make it $100k and pay it to me directly.
I'm not a fan of Musk, but his driverless cars are already driving around in my city alongside Waymo. His rocketship thing will probably be delivering tanks to the other side of the world within hours if the DoD gets their way.
I'm getting more work done every day than in entire months pre-2026, and I've done my share of hard engineering. I think you're the one coping.
They just solved a Millennium Problem for fuck's sake.
> I'm not a fan of Musk, but his driverless cars are already driving around in my city alongside Waymo.
NHTSA orders Tesla to prove its Cybercab is legal to sell, under oath - https://news.ycombinator.com/item?id=49728202 - September 2026
Me, me, me, personal anecdotes dont transfer much further. No full unsupervised self driving in Europe (as in the only SELF driving there is).
I look outside of a tiny IT bubble and the only change I see is people got a bit better search / chat, which is not seo-fucked much yet, just hallucination-fucked. Apps are more shitty than ever, quality is fading and becoming very rare.
World is changing but you picked weird, narrowly focused examples. Like entire military setup for all armies globally is now incorrect, US military became almost obsolete overnight due to running out of important ammo and rockets. Europe military ramping up. Whole world currently hates what US has become due to government you voted, and slowly but surely veering towards China. I never thought I would say this but right now China is much better strategic partner for Europe than US can be. And compared to everybody else I dont see any significant chaning coming in next decade or two, this is what US had become, its not one person or a family clan issue.
Just as puttin' seems a great Nato asset, trump seems a chinese asset based on long term consequences of their actions.
> They just solved a Millennium Problem for fuck's sake.
Oh wow, they can solve formal proof test driven development. That's great! I too think it's cool. It isn't going to replace lawyers, doctors, nurses, tradespeople, and everyone else that drives the economy that isn't LLM output. The most successful YC startups have been DoorDash, Coinbase, and Airbnb; regulatory arb and a crypto gambling site. I do not disagree you can spit out more code faster, or potentially better code with an average dev versus more expensive bespoke code with a senior dev. More code does not translate to economic gains directly. People do not want slop entertainment. No LLMs are needed to build everything in flight for the global energy transition (batteries, solar, wind, geothermal, etc).
AI Hallucination Cases Tracker - https://www.damiencharlotin.com/hallucinations/ (2041 cases identified so far)
80% of OpenAI, Anthropic's enterprise revenues come from 1% of their customers - https://news.ycombinator.com/item?id=49613331 - September 2026 (My note: show me these customers and their wildly more profitable enterprises from this incredible inference use; Meta scrapped their "AI focused" layoffs, Salesforce had to hire software engineers back)
AI is everywhere at work now, but the time savings are smaller than the hype - https://censuseasy.com/blog/does-ai-save-time-at-work - August 13th, 2026
> More than half of American workers have now used artificial intelligence on the job, according to a new U.S. Census Bureau survey. But when the government asked those workers how much time AI actually saved them, the answer was smaller than the hype: for about 7 in 10, it was two hours a week or less, or nothing at all. [My note: 0-2 hours a week! For trillions in capex!]
The State of Generative AI Adoption in 2025 - https://www.stlouisfed.org/on-the-economy/2025/nov/state-gen... - November 13th, 2025
The Impact of Generative AI on Work Productivity - https://www.stlouisfed.org/on-the-economy/2025/feb/impact-ge... - February 27th, 2025
> The next figure illustrates how generative AI-driven time savings vary with usage across occupations. Time savings and overall usage are highly correlated. Workers in the computer and mathematics occupation used generative AI in nearly 12% of their work hours, and they reported this saved them 2.5% of work time. By contrast, workers in personal service occupations used this technology in only 1.3% of their work hours, and it saved them only 0.4% of work time. The slope of the dashed regression line is 0.17, indicating that a 10 percentage point increase in the share of time spent using generative AI is associated with a 1.7 percentage point increase in the time saved as a share of hours worked.
"Feel the hope!" Like a religion, people want to believe when the data says otherwise. I have been in many churches in my life, but the church of HN is by far the most committed to their faith. If I'm the one coping, where's the proof? It doesn't exist. It is not my job to believe without objective data and evidence supporting an opinion or assertion. "In God we trust. All others must bring data."
I like to cite those St. Louis Fed links too but for the opposite reason. With the caveat that it's based on survey data, it is one of the few data sources that shows the real of AI in the real world. And it is pretty astounding. It is only used for 6% of all work hours but it saves 2% of all work hours.
That is very low usage, but that is a 33% savings!
Now let's put that trillions in capex into perspective. About 55% of people use it for 6% of all work hours. Approximating a bit, that's basically 3% of all of the work hours by all of the workers in all of US, and as above, AI saves a 3rd of that time, so AI is already saving 1% of all work hours in the US!
(In case you think this Math is off, the same St. Louis Fed articles above have similar numbers, and corroborates with other national data sources as well as research studies, and suggests that the impact of GenAI may already be showing up in "national level statistics" to the tune of a 1.3% bump in national labor productivity! With only this shallow level of adoption! In just 3 years! It took the computer revolution about 2 decades to show up in economics data.)
According to the BLS, employers pay $12.3 trillion for that work. So a 1% savings on that is a $123 billion. An up front ~$2T investment over 2 - 4 years that is already saving $123 billion annually in the US alone is pretty damn good actually, and will only go up as usage improves.
This is not hope, this is data, and you had already brought it with you! ;-)
No, that risk always existed. When the Communists took over Russia, they did not bother to honor all of the Tsarist debts. A country is not like a company. Sovereign default is always a choice. That is what it means to be sovereign.
There have been over 70 incidents of overt domestic default since 1800. The United States defaulted in 1790, when a portion of the interest it owed was deferred for 10 years, and technically defaulted again in 1933 when it abrogated the gold clause.
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?
> vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly
I wish you luck. Endless promises and short term thinking are the main things the system incentivizes. Each politician is temporarily renting their seat, paid for by other people. Each bureaucrat is studiously, steadfastly avoiding learning anything that threatens their continued employment, which is paid for by other people.
Eliminate candidates who promise to lower taxes (slows down debt repayment substantially) and those who promise new or expanded services. Who's left? "I'll tax you a little more and not spend that money" is a tough pitch, even if it would be helpful for the debt.
I think Clinton was the last us president to balance the budget and start reducing the deficit so I guess see what he did.
See what Clinton did? Well, he said he'd create a plan to balance the budget. And he did. It was a ten-year plan, and it involved doing very little for the first eight years, and then doing the real work in years nine and ten - that is, after Clinton was out of office, even if he got a second term.
Then 1994 happened, and the Contract With America. The Republicans took both the House and the Senate, and they passed a balanced budget , then, whether Clinton liked it or not.
So that's what "Clinton" did. He pretended he was going to do something, and the Republicans called his bluff, and made him do it.
Note well: Republican majorities in any other set of circumstances have not yielded a balanced budget. I'm not saying that they're the answer (what they did under Trump shows that they very clearly are not the answer for fiscal responsibility). All I'm saying is that "Clinton balanced the budget", while technically true, isn't really the way that played out.
> The Republicans took both the House and the Senate, and they passed a balanced budget
And Clinton signed it, which is what matters. Now the Republicans have both the House and the Senate plus the WH, where's the "balanced budget"? Nowhere, don't ask for it, nobody is going to sign it either - ask for $ 1.5 T Mil Bill and record deficits if you want it to pass.
Do you know what the 1995 Mil Bill asked for?
The Contract With America was a one-off stunt, in other words - mud in the eyes of the electorate. Old glory stories are worthless when they contradict the present reality,
The two parties were run by literate, service minded, adults back in the day.
If you believe in fiscal responsibility of any kind, if you believe said is critical to the survival of the republic, if you want a better future for our children and grandchildren, then you can't possibly vote for either of these parties today. They are both complete and utter failures with no improvement in sight.
So all we have to do is engineer a scenario where one party screws over the other one by accidentally doing good governance.
Or just hurry up and invent ASI and let it be someone else's problem to take care of this crazy human zoo.
“Promise endlessly” is an oft touted criticism of social safety net programs, when the reality is that reducing vast tranches of corporate welfare is typically more than enough to solve budget shortfalls.
> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
Maybe we should consider the possibility that there is no such candidate, or if there is, they cannot compete against the 'populists'. What then?
> they cannot compete against the 'populists'
You have to consider the fact that the populists are only popular because all the other parties in the last 20 years have made endless promises to the voters and failed to accomplish a tenth (if I am being generous) of what said they would do.
At some point, the blame as to lie also with whoever came before them too.
> 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?
Some green parties. Their primary goals might seem unrelated, but turns out caring for the environment and climate change is correlated with long-term thinking.
Note I said "some", before rushing to mention all the examples of green parties engaging in misguided policies. Those also exist
In the anglosphere it's more difficult because first-past-the-post voting makes such parties unlikely to succeed or be relevant
I believe voters are unfortunately useless.
In my country people voted in a party as majority that, not once left their terms peacefully in the past. AFTER our genZ ousted the other party, that came to power as a majority 17 years ago, changed constituency and controlled the parliament using majority, and turned into an autocracy
Now this party is shaping everything up using their majority for their favor (no surprise), ignoring all the agreements agreed upon by all the parties before election, under the interim government.
All those blood, deaths, injuries are wasted.
I think democracy is perhaps a fundamentally unstable system. It requires constant corrective force, and a lot of it, from a lot of people. When the members of that democracy start to get a little too comfortable it fails.
Humans are designed to operate in smallish clans with benevolent dictators whose right to rule is based on social currency with people they personally know. Anything else is a house of cards on unstable foundation.
I'm not sure how you fix that, but democracy so far has maybe been the least bad patch.
> ... the least bad patch.
That was Churchill's view, as he said during a speech in the House of Commons in 1947:
"Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time . . ."
The American founders predicted all these problems, which is why they formed a representative democracy. However over the years we have chipped away at that aspect and ended up with an election systems that encourage populism.
conservatives?
Is that a joke? Seriously. I don't see any conservative remaining, and it's been a while.
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.
Never underestimate the power of the fourth estate
Response to sister comment: conservatism, and the groups that claim to support it, are separate. Same with liberals, and socialists, and the Democrat Party.
So name one. These politicans have names, do they not?
We do have the name of one politician who balanced the New York City budget though. Its probably not going to please a lot of people to hear that guy's name though. But that's what people want, right? Balanced budgets?
But no. That's not what people want and we all know it.
One aspect of that balanced budget that should be noted is that it does rely on a sizable funding increase from the state government.
Now, that state is legally required to have a balanced budget itself, so perhaps this is a small side note rather than a major change in perspective. I just think it’s not spoken about enough when discussing how that budget process went.
NYC had a deficit of $12 Billion before the current mayor.
So what is he? A Democrat, and what else? Parties are groups of people, ideologies are pure ideals. They are distinct, with overlaps in their demographics.
If that were true, the streets would be punctuated by shrill screams in reaction to the past decade of Republican spending.
At least in the US, conservatives have done more to increase the debt than liberals for the last 40 years at least.
Turns out, that was just a lie that some people told fiscally conservative people to get them to vote against their interests, just like other "wedge" issues like abortion or trans people.
Trump, sitting on top of a Republican government, is responsible for 10Trn of the debt, about a quarter.
Conservatives gave up on principles long ago and have settled for simply lying about everything, including what's happening and who's responsible for it.
The words are so overloaded. Republican is just generic right wing. I think the "conservative" the parent is talking about is the neoliberalism like what Milton Friedman would propose. He would have wanted half of the government gone, next to no market intervention (he even argued against seatbelts in one lecture). That would actually be the "conservative" someone you stereotypically imagine like Ron Swanson would adopt, who describes the perfect government as just a person in a tiny white room. The Republicans are a joke, just like the Democrats. They're both there for themselves, and have no actual agenda, manifesto, ideals, or values. They've got all the junk identity politics, religion, abortion, immigration crap mixed in such that you're either picking crap or crap. There's nothing "liberal" about the Democrats and nothing "conservative" about the Republicans. The Republicans were even the ones who freed the slaves! Make of that what you will.
Oh, you want "libertarianism" then. Not the original kind, the Ayn Rand kind
That always works out well. Until the bears come [1]
[1] https://newrepublic.com/article/159662/libertarian-walks-int...
He didn't say what he "wanted". We're so blinded by partisan stupidity we can't even be bothered to read, understand, and think anymore.
"This is the thing I think of when X"
"Oh, so what you're describing is Y, actually"
"HE NEVER SAID HE WANTED Y! STUPID PARTISANS!"
Okay buddy
Japan is closer to 130% debt-to-gdp. The 200% number is based on gross debt and ignores some other mitigating factors for shock value.
Great.
Rates going higher increases interest expense materially. You either rack new debt or you cut in places that are uncomfortable. The point is: responsible leadership in the developed world has gone mia for decades. There's a price to be paid that's real.
Remains important to base any analysis on the correct numbers.
Or you print lotsa yen, which is probably what will happen here
Japan’s debt is mostly held local unlike some other countries.
The US’s most important export for many years was treasury bonds. As de-dollarization occurs, the United States is bound to face some economic reckoning.
It should be noted that even still almost all US debt is held locally.
Maybe it's time some people to update their understanding of the "Japan 200%+ debt" slogan that is mindlessly repeated.
https://www.hbs.edu/faculty/Pages/item.aspx?num=68142
Accounting for the asset holding, Japan's net debt is even lower than UK/US.
>The key lies in the Japanese public sector’s operation of a de facto sovereign wealth fund. Unlike countries such as Norway and Saudi Arabia, which fund such vehicles with national savings from natural resources, Japan finances its investments largely through domestic borrowing at very low floating interest rates
.... >In the case of Japan, evaluating fiscal positions solely through the lens of gross government debt can present a highly distorted picture of the overall fiscal health of the country.
More likely they are going to "monetize" the debt. Aka print yen to pay it off.
> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
These people do not exists. If a politician ran on such a platform, they would never get elected.
The fact is in modern democracies like in the EU or in the US there are simply too many people who rely on the status quo directly or indirectly.
Its almost comical, in France politicians have run, got elected and have swept the debt problem under the rug for the last 40 years, then they leave office and suddenly decide that the debt is a massive problem but that there was nothing they could do about while in office so they never did anything but now they speak about it.
And they all do it. Left, right, center, it's all the same.
> Maybe we should vote for people who are financially literate, can think long term, and can "conserve" rather than politicians who promise endlessly?
Conservatives:
Liberals: Deficit rate = (federal outlays - federal receipts) / GDP. Change = deficit rate in final fiscal year - deficit rate in first fiscal year. The % symbol below means percentage points of GDP, not relative percent change. The first and last fiscal years whose end dates occurred during each presidency are used. Transition fiscal years can therefore span two administrations. Figures are OMB actuals through FY2025 and are rounded to 0.1%.We found someone whose ai believes the President controls spending!
Congress controls spending in the United States:
Cumulative Share of Debt (Post-WWII to Present)When analyzing the raw accumulation of publicly held national debt according to which party held majorities in both chambers of Congress, findings from congressional studies (such as the Joint Economic Committee) reveal distinct differences:
(https://www.jec.senate.gov/public/index.cfm/republicans/2011...)
Democratic Control ~57% to 74% of gross debt
Republican Control ~10% to 25% of gross debt
Split / Divided Control ~22% of public debt
This is kind of a fool's errand given that sample sizes are small and there are large exogenous causes. But the pattern is consistent and agrees with theory, so I think the comparison is worth making anyway.
Could this be a lagging indicator, as in programmes take a while to setup and the budgetary pressure falls into the next term?
You really don't want to accept that our deficit expansion has been overwhelmingly due to Republican largesse, do you?
Democrats aren't fiscal conservatives, but the last time they were able to expand the deficit in pursuit of social spending was LBJ. Deficit expansion during my lifetime has been overwhelmingly driven by regressive tax cuts, regressive bailouts, and wars in the middle east.
Republican != conservative
:)
Also some of the numbers are very sensitive to start/end dates (remind me, did anything happen in 2020?)
Yeah, in 2020 we let Trump print $4T in a single election year and then he spent the next four years successfully convincing the weak minded that Biden caused the pandemic inflation by printing $2T over the next four years, running the printer at 1/8th the rate.
you don't think what they promise is important?
Just seems like one of those weird ambiguities.
japan is an empire, longest one too, you can't vote for that LMAO
Except that the emperor doesn't actually rule Japan - the Diet does, and you can vote for them.
Good luck with that after literally a thousand and more years, they can be most violent if times comes,
It isn't the debt levels that are causing the rates to spike, rather the start of the emerging Bretton Woods III era.
Could you be a bit more specific about what you think "Bretton Woods III" is?
Not sure what GP meant, but I found this googling that term: https://static.bullionstar.com/blogs/uploads/2022/03/Bretton...
This is indeed what I meant.
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
What could possibly go wrong.
Nobody has ever tried this before!
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.
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.
Not sure it plays out that determistically. If the gov prints money to just payoff debt without increasing the government spending, there is no new money entering the market.
You just pay off old promises that were expected to be kept.
The real risk is that new lenders will not be willing to lend you, yes. But not outright inflation.
That assumes the new lenders have an aggregate alternative.
If you follow the accounting in a floating exchange rate system you’ll find they don’t.
Find me a banker that will turn down free basis points and I’ll show you a pink unicorn.
So you agree it's a problem, but still characterized the situation as "all is good" in your first comment. I would not call that good, and I would be have used different words to characterize/trivialize this situation.
The math that isn't mathing is that GDP needs to stop being the number we look at. Goodhart's Law says that "When a measure becomes a target, it ceases to be a good measure." and GDP is no exception. If I pay a cleaner $200 to clean my home, that's $200 into the GDP. If I do it myself, that's not reflected in the GDP. If I buy a robot maid, pay for it once, and it cleans my apartment for me, thats an ongoing quality of life improvement that's not going to be reflected in the GDP. If that $50,000 robot maid frees up 10 hours/week for me to do other stuff, GDP might actually fall instead of rise.
> 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.
Buffett claimed you could solve the deficit problem instantly by firing congress when they run deficits. Obviously, untenable (they'll cheat, admin overhead, etc).
You could very easily force congress to balance the budget (both parties and the media have complained endlessly about this for exactly no good reason). You could also freeze spending at current levels and force congress to do it's job: allocate our limited resources most productively.
Hard to get re elected doing the right thing, but maybe we just need a throw away set of leaders to do the hard work?
There are really just two ways to avoid the inflationary spiral. You can either increase income (i.e. grow gdp) or you can decrease spending (i.e. cut entitlements).
This is as close as it can be to clearly explain. The problem is that most of our politicians are not explaining it and instead ignoring it. As an individual the only thing you can do is vote for candidates who are willing to have that hard conversation with the public. Unfortunately it looks like that would require voting for a third party candidate and a vanishingly small minority of the electorate is willing to do that. So given all of that context I'm not really sure that the term "Catastrophically indebted" is wrong.
> Debt service costs as a percent of GDP are in fact lower than they were in the 1980's
This is an amazing use of the "in fact" trope, in exactly the same misleading way[1]. I talked about debt, and you casually shifted to servicing costs which presumes that rates stay historically low...when they're actually rapidly rising. Comical.
In the 1980s, the debt to GDP ratio was less than half what it currently is. Rates were higher, making the debt a crisis level then, but maybe you haven't noticed...rates are going up. Indeed, right now the rates were historically low, and anyone with functioning grey matter saw what was coming.
The US has an absolutely solidified, structural deficit -- utterly zero chance of paying down the debt, and a desperate need to constantly be borrowing more -- and an enormous debt. The trajectory of rates say this is crisis levels.
It's actually kind of funny reading your ridiculous comment -- "screaming", "echo chamber", etc -- when you sound completely in denial.
Your argument is basically the guy that used the "0% interest for six months" checks he just got with his 28% credit card, telling everyone that it's free money, so there's no problem if he goes wild. ROFL.
Sounds like it's time for a $1.5T military budget and a $1.3T bribe! Free money!
Sidenote: When asked about the bond market, Trump seriously offered up the "military solution". Utter insanity.
[1] - It's also simply a lie, making this extra funny. The highest historic servicing cost was 3.2% of GDP. It is currently projected at 3.3%, and that presumes rates don't keep spiralling up. So your "in fact" was simple bullshit, even as you tried the narrative shift by changing from debt to servicing costs.
Double replying because I missed this accusation:
> It's also simply a lie
I don't know what you're trying to cite but your numbers are wrong per FRED:
https://fred.stlouisfed.org/graph/?g=1YCNz
>I don't know what you're trying to cite but your numbers are wrong
To be clear, my statement was-
"The highest historic servicing cost was 3.2% of GDP. It is currently projected at 3.3%, and that presumes rates don't keep spiralling up."
https://fred.stlouisfed.org/series/fyoigda188s
That ends at the beginning of 2025, and already it was equalling the historic max (which was during a brutal recession, it should be noted). Since then the debt has added trillions more (about $4T), and the rate due on that debt has kept increasing. Oh, and the debt of the US is increasing quite a clip faster than the US economy is "growing", even with the fantasy numbers from the sharpie presidency.
Yeah, jabroni, my statement is 100% confirmed fact. Indeed, it's incredibly optimistic, really, because if rates follow current trends, things are going to get dramatically worse by year end.
You're doubling down with more hyperbole. What's the policy suggestion? What do you propose to cut? Where do you propose to find new revenue? What compromises are you willing to make to other priorities and what stands are you taking on which you won't budge?
Shouting about deficits is, to be blunt, just crack for the incurious mind. It's a party you're throwing for people who agree with you. Refusing to treat with the very real (and despite your hyperbole, very soluble) problems is likewise a trick your brain is using to expand the guest list: you can get almost everyone to sit at a "Deficits Suck" table, it's much harder to populate a "Let's Talk About Entitlement Restructuring and a VAT" forum.
But it's the boring wonks at the forum (the one's you're shouting at!) who are ultimately on the hook for saving you.
> What do you propose to cut? Where do you propose to find new revenue?
I'm not American, and no one needs to "save me". The country is a fucking idiocracy, and you elected a fascist self-dealing conman pedophile rapist. I pointed out objective, indisputable reality and you responded with some farcical lies and pearl clutching nonsense.
But you know, when your country is bankrupt, increasing military spending $600B, paying for endless vanity projects for that disgusting bag of shit to emblazon his shameful name on your country for eternity, or even entertaining the disgusting "bribe the population" farce is just fantasy.
Endlessly giving tax cuts and breaks to your kleptocracy/plutocrat class...maybe an incredibly stupid thing to do, no?
Nah, something something 1980s nothing we can do hey let's build an arch to celebrate the most catastrophically destructive president in history!
One contributing factor might be that AI companies are raising money via (amongst other methods) also issuing bonds, which might compete with government bonds.
Turns out countries with constitutions forbidding excessive debt are quite smart. It's like phone addiction -- if the parents don't lead by example and strictly enforce "no phones at the dinner table" then slowly it's just gonna creep back in and everyone's just staring at their phones again.
Debt is easy to deal with for a sovereign. Just dilute the currency. That will obviously happen before a debt crisis is allowed to materialize. And so the rich will get richer.
The real problem is not the debt, but the social instability caused by the measures taken to address the debt.
This would also make countries that constituionally prevent that level of debt look smart. At least if we see the state as an institution that should serve its citizens. If taking on debt requires making your citizens worse off to the point that it causes social instability that didn't serve them very well
If you see the state as an institution to allow the rich and powerful to extract resources from the rest of the population, then it's all fine. Just take out some debt to give a contract to your nephew, then pay it back by devaluing the currency
Not working so well for Germany
https://youtu.be/ajH6YVhdOZU?is=Xht8Qsd_eGqnS7wW
In the short term it will always look stupid. Borrowing allows you to invest, which leads to growth, which allows you to borrow more.
But debt also accumulates, and usually faster than GDP growth. Until debt servicing starts eating your budget. Which is a slowly encroaching killer
I find it difficult to draw conclusions just yet. Yes, Germany is under-investing and that hurts. But with another 20 years of hindsight it might look like the lesser evil
France is in a dire situation right now.
10y OAT are at 4.5% and rising with almost 100bps difference with Germany and no budget for 2027 since there is no majority in the parliament.
There is also a 6% deficit expected and growth has been revised down to 0.4% although during the first 6 months of 2026 there was actually a decrease of 0.2% of GDP in total so finishing the year in recession is totally possible.
Unemployment could also reach around 9% (15% in real terms if you count the people who have given up and/or been removed from the stats since they ran out of benefits).
Finally gasoline could reach 3 euros/liter (USD $13 per gallon) before the end of the year (already sitting at 2.5 euros/liter in many parts of France right now).
> and no budget for 2027 since there is no majority in the parliament.
The French government can pass laws without a vote in the parliament under Article 49.3 of the constitution. I think the last budget was adopted in this way.
It can try but it could also be toppled by doing so. Last year the government had something to trade with the socialists (postponing the increase of the retirement age) so without the support of the socialists, the motion to topple the government failed.
This year is different. Macron is on his way out and everyone wants to stay as far away as they can from him including his former prime ministers who are both running in the election.
That means that there is literally nothing they can offer to the opposition to avoid being toppled. If a parti were to agree to not topple the government on the 49.3 motion, they would be signing their own death warrant for the election.
And don't expect any debate on economic policy in the next presidential campaign either… It's just going to be “should we tax the billionaires” vs “should we save a few basis points of GDP in pensions”, none of which is remotely close to the order of magnitude that's needed to put the country back on its feet.
It will be all about immigration and cost of life crisis. And of course the general finger pointing at the EU bogeyman
Indeed, and a bunch of culture war issues imported straight from the US by the people who pretends to care the most about French “identity”. But I was talking about the economy-related topics.
I am not expecting anything. I left France a long while ago and I am not planning on coming back anytime soon except for holidays.
> the order of magnitude that's needed to put the country back on its feet
The amount of reforms needed in France could fit in an encyclopedia. LFI or the RN will not fix this mess and the center who has been in power for 10 years is all but useless. The old center-left and center-right parties have all been in power also and led us to this place which means that are not the solution either.
Seems to me that France is well and truly stuck on a slow but certain decline. But the other EU countries are not doing much better either.
France doesn't need “reforms” though, quite the opposite.
France needs a project, and a project behind which the French population can rally. Because unpopular “reforms” carried on by centrists with a Thatcher envy is all we got over the past 25 years and that's what got us where we are now, with no growth and a decimated political landscape.
The said can be said about Germany and the UK as well, by the way.
more social security will fix this I think? they need to spend 100Billion more on that so long term they can go into more debt.
/s
"I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody."
- James Carville
The war(s), especially with the impact on pipelines and the Houthis taking over more of Yemen, are finally affecting fuel prices and hence turning the global economic outlook less positive.
You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.
Not just reserves, but also all the oil already on ships slowly making its way to its destination. I think I even saw someone predict that around September, the oil issue would get worse due to how slowly those ships move.
Are you referring to this https://www.youtube.com/watch?v=Jf3rHAXOZj0
> You can print money, but you can only ""print"" oil for a short time from reserves, which the US and China have been draining.
What's different between the two is that apparently China hasn't made an equivalent dent in its oil reserves, despite no significant reduction in travel, and despite reducing its import demand by 1 OPEC.
It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.
Apparently the main reason they have started buying crude again is not for internal consumption as much as taking advantage of the massive crack spread in refined petroleum products (like diesel) which they export.
> It's not entirely clear how - but theories include shifts from flights to train travel and shifts from gasoline cars to EVs.
From a distance, those look like pretty sound theories.
It's wild that the pols and talking heads in the US have been screeching about how "dangerous" China is since the 90s (I remember family members making crude jokes about why I should be learning Mandarin instead of Spanish in middle school) and, yet, here we are doing everything we can to hand them the reins of world power.
As The Onion put it eons ago [1]
"There's no shame in being second best!"
[1] https://youtu.be/53tGLKlsQv8
> China hasn't made an equivalent dent in its oil reserves
I think the easiest explanation is that this probably isn't true. The US SPR is underground, it would be quite easy for China to manage its equivalent in secret, for whatever reasons.
The Chinese EV shift is real and significant, though.
China has slowed replenishing its reserves as it'd prefer to buy on dips. It's dipping in at times, not releasing barrels to the open market. https://www.reuters.com/commentary/reuters-open-interest/chi...
EVs are a minority in China outside of a few biggest cities.
> EVs are a minority in China outside of a few biggest cities
Those biggest cities are majorly influential in absolute energy demand and also patterns of use.
The second tier cities will be buying the big cities used EVs in not too long.
> massive crack spread
> turning the global economic outlook less positive
Specifically, mounting inflation expectations, no? Investors wouldn't want to park their money at 4% if they expect inflation that is close or higher than that.
They have different kinds of risk, but do AI investments and bonds compete for investors?
Only in the secondary market. In the primary market they require different types of money for settlement.
If you buy an AI issue, then the AI company has the bank deposit and the bank still has the matching reserves needed to buy government bonds in the primary market. All that changes is the ownership tag on the bank deposit.
"Money flows through markets, not into markets."
That said, there is a meaningful difference in terms of who has control of the money, and what they choose to do with it. Bank reserves are a red-herring; before the investor chose to buy either AI or government bonds with it, it was sitting in a bank deposit where the bank had parked it in short-term Treasuries. But prices are set on the margin (because again, money flows through markets, not into them), and so it is the act of that investor choosing to buy AI company bonds rather than government bonds that sets the relevant interest rates of both.
A related confusion is that the bank reserves are parked in short-term T-bills, whose interest rate is largely controlled by the Fed, while the investments we're talking about are AI corporate bonds vs. long-term government bonds. These are three different asset classes that trade on three different markets with three different interest rates.
But looking one step back, the investor might need to sell something else to raise cash to buy the stock?
I suppose in that respect, all investments compete.
Yes there's only so much credit on offer and the rising yields precisely when corporate debt is skyrocketing to finance massive data center expansion would indicate that that is indeed a factor.
Op-eds claiming the opposite because "trust me bro" would also make me inclined towards the "data center build out for AI factors in for rising yields in sovereign debt"
iirc data center construction investments are largely bond funded so this will absolutely fuck them.
you may have the causality reversed. perhaps treasury yields are rising because bond investors would rather fund data center build out than buy 10yr notes
no. treasuries establish the interest rate floor. data center bonds require a risk premium on top of that.
It becomes clearer to more people that it's impossible to predict the future shape of the global economy due to AI.
The more clear it is, the cheaper 30 year bonds become.
AI isn’t even remotely the issue here, it’s Trump war and other insane behaviors
> It becomes clearer to more people that it's impossible to predict the future shape of the global economy due to AI.
You mean due to Trump? Tariffs and Iran war caused this.
Your local American tariffs can hardly explain a global rise in long term yields. The Iran war isn't going great economically but doesn't explain thks. If anything the Russia-Ukraine war has had a bigger influence.
Curious to see what transpires with federal fund rate alteration in the acute future.
Both Warsh and Bessent are pupils of Druckenmiller, but Warsh seems aligned with Druckenmiller regarding letting the market naturally settle on appropriate bond yields, whereas Bessent is being a Trump puppet and attempting these various failed interventions to artificially lower yields.
I hope Warsh stays strong and doesn’t bend the knee!
The US will continue to starve the world of oil and natural gas as long as the stock market goes up.
Notice that the stock market is at all time highs because 50% of the economy is grift now and not real. That is why Republicans go into vast deficit spending to pump up AI and worthless "high-tech", "disruptive" defense stocks.
Trump (and British pound saboteur Bessent) don't care one bit if the US plebs and the rest of the world suffer. The game is printing money, give it to grift companies like AI, have family invest early and get out if everything collapses. Probably they get into real estate cheaply due to foreclosures.