Shutdown or Government Finance Crisis?

Please convince me that I’m wrong:

  1. The Trump Administration’s tax cuts have increased the US budget deficit to unprecedented levels.
  2. Normally, this is not difficult to survive because the US Treasury can sell bonds easily.
  3. Repeated game playing over Federal debt levels by the Republican leadership - coupled with the impetuous unpredictability of the Trump policy engine - has led to a precipitous drop in long-term US Bond sales, especially to foreign governments and entities.
  4. President Trump has engineered a destructive and pointless Government shut-down.
  5. The leader of the World Bank hasunexpectedly resigned his position. (and would traditionally be replaced by a candidate appointed by the US.)

I think we are sliding into a very serious and dangerous Government finance crisis. I don’t mean the deficit will increase, or even that the debt will, but that the day-to-day financial transactions, lending and borrowing that keep an indebted enterprise afloat are beginning to fail as regards the US Government. Much like what happened to Greece a few years back, we are reaching the point where no one wants to lend money to the US Government.

This is not entirely Mr. Trump’s fault. The GOP leadership played games with the national debt ceiling throughout Mr. Obama’s administration using it as a bludgeon to try and get increasingly one-sided legislation passed. But as a matter of simple fact, the faith of foreign leaders in Mr. Obama held us together, while Mr. Trump’s leadership has only exacerbated the problem.

Please, convince me that I’m wrong. Tell me why I should believe that A) the government shutdown is not driven by a lack of ability to pay, and B) that we are not snowballing into a global finance meltdown.

Wait…you are thinking that the government (the US government) is in shutdown mode because there isn’t any actual money to pay the federal workers?? And this is because US bonds aren’t being bought by foreign countries? :confused: I’m just checking to see if I’m getting this right and that’s what you are really asking.

I’m not suggesting that we are there today, but that it is where we are headed and that it’s not far off.

A government shutdown that lasts for a few weeks has nothing to do with a treasury bond that matures in 10-30 years.

It’s been not far off for at least 25 years.

I’m suggesting that it has to do with whether we can sell enough of them today. And whether we can sell one today is dependent upon people believing that we will be around and financially solvent to pay it off in 10-30 years.

There is no question at all that the US Government is having trouble finding buyers for bonds. As the cite in #3 shows, the interest rates we’re having to offer for even short-term bonds are becoming unsustainable. There simply are not enough buyers to soak up this deficit increase.

:confused: They’re slightly higher than they have been in the last few years, but that’s only even noticeable because they were at a record low.

If you read the cite it nowhere mentions that investors are fearing that the debt service is not sustainable, rather that the cost to hedge US currency has gone up because the Fed has hiked rates. If the US were having to increase the interest rates on bonds because of a fear of default there would be no way to hide it and it would be the lead story on every newscast in the world.

This was pretty much what I was thinking. It only looks like it’s going up a lot or there is an issue when you don’t look at a larger slice of time. As far as I can tell, there are plenty of takers for US treasury notes. China (and I think Japan) had sold off a bit earlier in the year, but I think it was for other reasons and it wasn’t like those just sat there afterwards. I think both are still over a trillion dollars at this point, though I haven’t looked lately.