It will simply be refinanced, like all other debt with sizeable balloon payments. The underlying problem is not the so much the maturity, which can create liquidity issues, but the continued use of debt to finance government deficits.
Over $9T of Federal Debt Will Mature in the Next Four Years
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Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#22Why is this a news? Doesn't federal debt mature all the time?
Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#23Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#24Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation?
Yes, you are wrong that it will likely cause hyperinflation. Even if the Fed simply monetized that debt (which it won’t do) you might get some inflation, but nothing close to HYPERinflation. What’s more likely, as the article states, is that more investor money will go to the government rather than mortgages or commercial loans, which will slow the economy, drive up interest rates, and potentially cause deflation.
A lot of the new bonds will replace what's already been loaned to the government, so what will matter is the delta between the interest rates on the old bonds and new ones as well as whether the new bonds have different maturity times. So how much rolling the debt over will drive up interest rates is debatable though the issuance of new debt to finance the current deficit is more likely to do that.
Of course, that assumes that there are buyers for the rolled over debt. The biggest source of financing over the past 20 years (China) isn't exactly happy with the US government right now. That could drive up interest rates on the bonds and cause problems.
Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#25"If you have the right people, like, in the agencies and the various people that do the balancing ... you can cut the numbers by two pennies and three pennies and balance a budget quickly and have a stronger and better country."
-Trump
"I’m pledging to cut the deficit by half by the end of my first term in office."
-Obama
"We must balance the federal budget. We can do so without raising taxes. What we need to do is impose spending discipline."
-George W. Bush
[ Bill Clinton and Newt Gingrich actually did briefly balance the budget ]
"Balancing the budget is a little like protecting your virtue: You just have to learn to say 'no'".
-Reagan
Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#26Earlier quoted context omitted.
Interest rates will go up.
for what? mortgages? car loans? what else?
US Treasuries are considered the safest types of bonds (confining our discussion only to the US bond market). They are backed by the full taxation power of the US government and so are extraordinarily unlikely to default.
In that sense, they set the "risk-free rate of return" by which other investments are baselined. Not happy with the 2.5% (or whatever) on a Treasury? Well, you might want to invest in a state/municipal bond, or a company's bond offering, mortgage-backed-securities, or stocks. You would only invest in those riskier investments if they promised to pay you a rate higher than the "risk-free" rate of Treasuries.
In that regard, rising Treasury rates increase the market-clearing interest rates on any borrowing which is considered riskier than the US government's likelihood of non-payment, so in short, on all other sorts of borrowing. (On fringes, this may not be the case where statutory limits apply, such as on credit-card default rates. If the risk-free rate rises high enough though, such lending might be curtailed in favor of simply moving down the risk ladder if the returns become artificially compressed.)
Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#27Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation?
I think though the question is how does it bode for the dollar... relative to every other currency. I'm not saying it won't have any impact but the dollar has been attractive for all the usual reasons for a long time, and over the course of a lot of events that folks predicted would make it less attractive.
To be more specific: where else is that money going to go? There's a number of small stable nations out there but none sell bonds in sufficient quantity to meet investor demand. The EU isn't a coherent enough financial sector to absorb that demand, nor stable enough. China isn't selling (and would be risky) - if you have large quantities of cash you need to park the US is still your best option unless you want to get into commodities and nothing is stable enough there.
Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#28It will simply be refinanced, like all other debt with sizeable balloon payments. The underlying problem is not the so much the maturity, which can create liquidity issues, but the continued use of debt to finance government deficits.
This is not a problem as long as the RoI on spending is possible, or as long as the dollar value of the economy is expected to grow, through population growth, productivity gains, or inflation.
A government budget is not a household budget, and the same rules don't apply to it.
Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#29Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation?
> Am I wrong in thinking that this doesn't bode well for the value of the dollar over time, and will likely cause hyperinflation?
Yes.
The effect of federal debt on money supply is de minimis. Much more important are economic growth (i.e. money demand), lending (i.e. money supply) and rates (i.e. the "price" of money).
Re: Over $9T of Federal Debt Will Mature in the Next Four Years
#30"If you have the right people, like, in the agencies and the various people that do the balancing ... you can cut the numbers by two pennies and three pennies and balance a budget quickly and have a stronger and better country." -Trump "I’m pledging to cut the deficit by half by the end of my first term in office." -Obama "We must balance the federal budget. We can do so without raising taxes. What we need to do is i…
Obama did cut the deficit in half. More than half. At least over the course of his entire presidency, not sure about the first term.