A dire warning was just issued by the man at the center of the US Government through the GFC. What’s the warning now?
A Dire Warning
Henry Paulson just broke years of radio silence with a serious warning. The man who managed the U.S. Treasury through the 2008 financial crisis is now saying the Treasury market itself is heading toward a vicious emergency.
“We need an emergency break-the-glass plan, which is targeted and short-term, on the shelf, so it’s ready to go when we hit the wall.”
We’re sitting on $39 trillion in federal debt, with interest expense now over $1.2 trillion per year and growing at a terrifying 17% compound annual growth rate over the past six years. That works out to about $3.5 billion per day.
Annual interest expense, with CAGR since 2020.
As interest costs soar, we do not raise taxes- instead, we just issue even more debt (increasing the federal fiscal deficit, or the gap between federal spending and revenue). As more debt supply is issued, if demand does not rise at a commensurate rate, the price must decline.
And according to Paulson, foreign demand for Treasuries is no longer something we can count on.
In fact, the share of government debt that’s held by foreign and international investors has been declining for 14 years:
Foreign held debt, …
This post was originally published here
