By Nick O’Connor – Capital & Conflict (Great Britain) –
I’ve no idea if this will reach you, but I thought I’d give it a try. I suppose congratulations are in order. You’re the president-elect. But what kind of world are you going to inherit?
Well, let’s start with the big picture – your financial position. By “your” I mean your country. You’re inheriting a bond market that could be at a vitally important turning point. For 30 years US bonds have been in a bull market. But there are signs that’s coming to an end. That’s a trend that could define your presidency, more so than your policies.
Your predecessor added more to the national debt, at lower interest rates, than any other president in US history. When he took over, the debt stood at just over $10 trillion. Now it’s a shade under $20 trillion.
You’re a businessman. You know that not all debt is bad. If you use the money you borrow to invest in real, productive enterprises that produce a positive return, debt can be a good thing. And you don’t even have to make that much of a return these days, since interest rates are so low.
Only time will tell if it was worth increasing the national debt by nearly $10 trillion. My guess is it wasn’t. But what do I know?
Well, I know that just the interest payments on this debt is expected to triple to $712 billion by 2026. That’s a heck of a lot of money. You’d better hope that borrowed money is producing a return by then.
If it isn’t… well, perhaps you’ll be able to borrow more money to meet the repayments. Though interest rates may be higher, potentially significantly so, by then.
And don’t forget that’s just the national debt. The good people of the US have been following in the footsteps of the government. Has anyone shown you how much debt students are getting themselves into these days? If I’m the first to point this out – sorry! It’s not a pleasant picture. But here it is anyway: student debt in the US.