I heard a speaker say that if the Treasury yields ever climb above 7-8% that the US would not be able to service it's debt in 5 years with projected deficits. I have also heard people say that with "rampant" inflation down the road that we could see double digit yields in 5 years. Although, I would love 10 percent yields on a long bond, if the US could not service those interest payments.... we all lose. I am interested in the opinions of people here. What is your guess on the 30 year treasury bond in 1,3,5, and 10 years from now?
US could sell some of their gold reserves if inflation went nuts would lower deficit and make balance of payments a little more manageable. If rates get to high they can just print more money to service debt which what Schiff talked about... and thats when inflation go hay wire.
Personal opinion.... > 10% The battle of the fiats ......"is on"..... When....nobody knows....nobody.... Nobody knew when Carter was Pres.... and Volcker took the wheel..... Volcker would be an interesting person to pose this question....
The only long-term "solution" for the debt is to repudiate it. You'll get a 10% yield but you'll be pissed as the yield rises to 15%, 25%, 50%........:eek:
Could they even let yields get that high? I'm not really that up on economics, but 8% seems completely unsustainable. Why would they even bother issuing debt at that rate? Seems like it'd already be game over when we got there, nevermind if we actually started handing the notes out with those rates attached.
.................................... It is not going to be THEIR choice.... It is going to be somebody else's choice... THOSE that have the $.... It does not matter what one needs.....it is what the loaner will accept....
Well that was my point. If all that will be accepted is 8+%... maybe it's just time to stop issuing debt and start paying downt he current debt to get the rates out of the stratosphere. Or does it not work like that? Forgive me, I r economicz noob.
In the late 70's early 80's, yields were in the upper teens. I think 8%+ is coming myself but I am interested in what everyone else thinks as well.
8 points is trouble. We're paying almost 3 points and it's a big chunk of the yearly budget - almost a sixth, AIR. Triple that to a third or half of the budget? Yikes. That's the interesting catch 22 we are in. If we inflate to pay down the debt with cheap future dollars, we'll trash our ability to refi. Unless of course we lock in long term rates. Which is why smart folks are watching the auctions - if the feds seriously ramp up long term financing, that means they are ready to ramp up inflation. It's like borrowing the max and locking in your 30 year mort at 4 points, then pushing the panic button so rates soar to 20 points. Then you dump your excess into the longest CD you can and make the spread.