Fear continues to mount that the US is on the verge of a major financial crisis.
Fear Mounts Over Ballooning US Debt
May 29 (King World News) – Gerald Celente: With another round of U.S. treasury bonds to be unleashed onto an already flooded market late this summer, investors are expecting bond prices to fall, especially among long-dated bonds.
Neither presidential candidates Biden nor Trump are touting plans to cut the national debt; few Congressional candidates are campaigning on plans to raise taxes or cut spending.
As a result, bond investors see only an ocean of debt in the future, keeping bond prices low, Reuters reported.
Some asset managers are shifting funds defensively to avoid losses if treasury securities’ yields rise, which they will do as bond prices fall.
Others worry that so much deficit spending will be needed to pay the government’s bills that the $27-trillion treasuries market could be destabilized…
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Because U.S. government securities are a bedrock of the global financial system, instability in treasuries would have possibly dire consequences worldwide, Reuters noted.
“If we take a step back away from the Fed and away from the next six months where we could still get substantial rate cuts, supply numbers are not healthy,” Ella Hoxha, in charge of fixed-income investing at Newton Investment Management, told Reuters.
Yields on 10-year treasuries could soar from today’s roughly 4.4 percent to 8 or 10 percent in a few years, she thinks. She is shifting to treasuries with only short-term maturities. “Longer term, it’s not sustainable,” she warned.
To fund deficit spending, federal debt could swell by $21 trillion to $48 trillion by 2034, the Congressional Budget Office has projected from current data.
At the same time, the market for U.S. bonds is shrinking. Foreign buyers are buying less. The U.S. Federal Reserve has been unloading trillions of dollars in bonds and has said it will keep a much smaller portfolio in the future.
“One of the things we’ve been talking a lot about internally is not just the supply but the demand,” David Rogal with BlackRock’s fixed-income group, said in a Reuters interview.
“An environment where you have a reduced buyer base and more supply definitely makes me think that over time you will see more term premium,” he said, citing a measure of the extra return investors demand for buying long-term bonds, which extends their risk further into the future.
“Ahead of the elections you probably don’t want to be owning as much very long-dated U.S. Treasuries,” Brij Khurana, a fixed-income portfolio manager with Wellington Management, told Reuters.
Others echoed those concerns.
Craig Ellinger, head of Americas fixed income at UBS Asset Management, said short-term debt “seems like the safer place to be in case deficits do get out of control.”
“The answer is reducing spending, and neither [political party] wants to do that,” Kathryn Vera, StoneX’s chief market strategist, said to Reuters.
TREND FORECAST:
As we wrote in “Interest on National Debt Costs More Than Defense, Medicare”, the U.S. Congress has transformed its purpose from legislating budgets to legislating the culture.
Political clowns running the nation keep ramping up WWIII by sending hundreds of billions of dollars to fight the Ukraine and Israel Wars as the nation sinks deeper in debt and the country’s middle class shrinks, poverty rises and its infrastructure rots.
And with the presidential and congressional elections ramping up, the freaks running for office spend more time cheering pro-life or pro-choice forces and wringing their hands over transgender issues than they do over getting the nation’s finances in order.
This election year has only sharpened the focus on culture clashes. As a result, the budget crisis has fallen even further down the list of politicians’ priorities and fallen completely off of voters’ radar screens.
Politicians, afraid of losing the next election, need permission from voters to make the hard decisions necessary to balance the budget, which involve cutting spending and raising taxes.
However, the public has tuned out the debt issue.
Therefore, as we said in “U.S. Debt Outlook Worse Than Officials Admit”, it will take a financial earthquake on the scale of the Panic of ‘08 to shake politicians out of their comfort zones and make some hard compromises that might begin to bring fiscal sense to the federal budget.
A growing debt will sink the dollar’s value at a time when it already is under threat from the BRICS trading bloc and its effort to create an alternative currency for world trade.
Ultra-Wealthy Moving Into Physical Gold
To listen to Egon von Greyerz discuss the ultra-wealthy moving into gold and how that will impact the gold market CLICK HERE OR ON THE IMAGE BELOW.
Silver Shorts Are Desperate And Trapped
To listen to Alasdair Macleod discuss the silver shorts being trapped and what to expect from gold and silver in the coming weeks CLICK HERE OR ON THE IMAGE BELOW.
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