Bidementia has left Trump with an enormous mess. Huge deficits, massive debt pile, rising interest payments on that debt, and no easy way to fix the mess. I think Trump and his advisors hope they can grow their way out, but that isn’t really possible. A higher growth rate won’t fix higher interest rates or inflation. The Department of Government Efficiency sounds great but can’t touch more than maybe 10% of the budget. Sooner or later there will have to be substantial changes to Social Security, Medicare and Medicaid. There is no other solution.
And despite the optimism surrounding Trump’s election, the ugly truths about the debt problem continue to be reflected in the regular US debt auctions, particularly on the long end. Today a mere $13 billion (mere compared to the regular $60 billion auctions of shorter term debt) in 20 year bonds were sold. A higher than expected rate of 4.69% was needed to complete the auction. Demand characteristics were also weak. Just for comparison, three years ago the interest rate on this security was around 2%. (ZH Post)
