Summary: another in a series about the financial condition of the US government. This is a follow-up to Another crack in Republic’s foundations: not the size of the debt, but when it’s due (30 October 2009).
Considering the size of our debt, the Treasury staff deserves a round of applause for their performance during the recession.
Bad news sells newspapers and generates Internet traffic. So we’re well-informed about the bad news, with many stories telling us that:
- foreigners (our biggest creditors) are selling — or even dumping — Treasuries,
- the government is having (or will have) difficulty finding buyers for the on-going flood of new bonds,
- the government (in this case, the Treasury) is incompetent.
Fortunately all of these are false. Interest rates remain at post-WWII lows, disproving the first two. That the government has so easily sold so many bonds suggests the last is also wrong. More powerful evidence is that they’ve not only successfully borrowed so much money so quickly at low rates — but that they have done so while increasing the maturity of the debt! Alarm bells sounded when the average maturity hit 50 months, esp when almost half the debt due during the next 12 months. Since then this critical number has decreased to 30%, reducing the danger that a spike in rates would prove catastrophic for the budget. (source: the Treasury’s “Quarterly Refunding Charts“, 1 February 2010)
The debt is a burden, almost certain to grow as the economy slowly recovers from the recession — and grow after that as the boomers age from taxpayers to taxpayer-subsidized retirees. Let’s hope the Treasury staff can perform miracles, delaying the day when America must take responsibility for its past actions and change course — if the nation is to survive, let alone prosper.
Posts on the FM website about the government’s solvency
- Forecasts – Why wait? Read tomorrow’s news … today! (part 3), 17 July 2006
- The post-WWII geopolitical regime is dying, 21 November 2007
- We have been warned. Death of the post-WWII geopolitical regime, 28 November 2007
- The most important story in this week’s newspapers, 22 May 2008 — How solvent is the US government? They report the facts to us every year.
- The most important news of the month. Perhaps the year., 25 September 2008 — Warnings from our foreign creditors.
- A certain casualty of the recession: the US Government’s solvency, 25 November 2008
- Beginning of the end of the Republic’s solvency. Soon come the first steps to a reformed regime – or a new regime., 14 August 2009
- Update on our government’s deteriorating solvency, 1 October 2009
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