The liberal New York Times is not traditionally a newspaper that calls for reigning in spending but a recent article shows a change of tune. Despite inexpensive borrowing rates, the publication senses the danger of our towering debt approaching.
The argument put forth is that although borrowing rates are extraordinary now, the White House forecasts that servicing the debt will come to a potentially unmanageable head in 2019, reaching $700 billion in 2019 as compared to $202 billion at present, regardless of whether budget deficits shrink drastically. Other forecasters say this is low-balling the number.
Low interest rates do not necessarily means the debt position cannot continue to rise, consider Japan for example, who has been struggling to wriggle out from beneath its debt for nearly two decades.
According to the Times piece, “the government is living on teaser rates” and treasury has failed to consider the emergency is will face when the debt must be sold into a bear market. While the Federal Reserve rate increase will not approach for some time that does not make the threat negligible. The Treasury will eventually be confronted with trillion in debt and the realization that investors will have no reason to buy in the face of an FOMC administered program to normalize rates.
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