Investors fear America's solvency crisis
People are worried about America's solvency
The Financial Times reports growing concerns among investors about the solvency of the United States, as the national debt continues to rise and fiscal challenges mount. The article examines the implications for the global economy and the potential for a crisis of confidence in U.S. Treasury bonds.
People are worried about America's solvency.
- throw0101d
From 2018, "Sadly, Fiscal Restraint Is No Longer a Core Principle of the GOP":
* https://www.cato.org/commentary/sadly-fiscal-restraint-no-lo...
When you've lost the Cato Institute…
More recently in 2025, "The petrodollar, not GOP fiscal restraint, is what sustains our unsustainable debt":
* https://thehill.com/opinion/finance/5465671-republican-fisca...
Not that I believe the folks at the top at the GOP really cared about it, ever, going back to (at least) Reagan; it was mostly an excuse to cut taxes on the wealth and cut social programs:
* https://archive.is/https://www.nytimes.com/2003/09/14/magazi...
- cmiles8
Financial markets work in strange ways.
The markets generally respond to US concerns by buying more US treasuries. That’s counter-intuitive but reflects the situation that if things hit the fan they feel loaning the US money is still the safest place for their money.
For better or worse there’s unlikely to be a scenario where the US becomes insolvent but it’s not far worse for those outside the US.
- root-parent
- thelastgallon
What happens if US becomes insolvent? Is USD going to be inflated? hyperinflated? Will other currencies appreciate or just devalue their own currency by the same percentage to keep up the exports and continue to earn USD for oil?
- m101
Here are the numbers for the US, as a percentage of GDP:
- Government Debt: 123.0%
- Tax Receipts: 17.2%
- Spending: 23.1%
- Deficit: 5.9%
- Interest on Debt: 4.2%
So yeah, 1/4 of taxes go to paying interest. To allay the debt concern crowd a bit: gdp numbers are real numbers, so inflation of 3% and growth of 1% = 4% nominal, so that deficit number actually means that next years govt debt as percent of gdp won’t be materially higher.
This is the government playbook: create actual inflation of 6% per year, with reported statistic inflation of 3% per year. This means real growth looks like +3% before you need to talk about contractions/recession.
All this means that the sovereign crisis is not near and the government steals your savings at 6% per year.
- latentframe
Interesting part is the gap between beliefs and prices => if the investors expect a US debt crisis we expect it to show up somewhere in the term premium real yields dollar or inflation expectations ; those signals can remain muted for a long time
- epsteingpt
No one serious is worried about American solvency. The paper says 50% over the next 10 years, but even most economists misunderstand how the monetary system works.
There are so many other issues to worry about at the moment more immediate than solvency.
- hellisothers
Just finished “Super Sad Love-story” and worrying about this hits hard :grimace: