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Barb Marto's avatar

It had to happen sooner or later. The one thing I know for sure is IQ47 is not going to like this birthday present. That is if his sycophant toadies have even told him yet.

Fred Ferguson (GeezerWise)'s avatar

Barb, timing is everything 😄

If this trend keeps building, it’s definitely not the kind of “gift” Washington was hoping for.

Markets have a nasty habit of ignoring political spin and following the math anyway.

Susan's avatar

Oh, so clever - 'IQ47'.

Barb Marto's avatar

Thank you. It was suggested to me in favour of what I was using. Says the same thing, but using only four key strokes. Please use it

Susan's avatar

Thank you.

Fred Ferguson (GeezerWise)'s avatar

Barb 😄 Fair enough... I got the memo.

Four keystrokes wins on efficiency alone.

I’ll adopt IQ47 going forward.

Patricia Poohkay's avatar

As always Fred, it is so easy to read and listen to your posts/articles. There is no word salad. And you address one thing or issue or point, and don’t belabour it with a lot of “stuff.” You have good information and don’t need to “prove” that you’re good and know your “stuff.” Short and to the point. I always appreciate that. Cheers my friend!

Fred Ferguson (GeezerWise)'s avatar

Patricia, thank you... I genuinely appreciate that.

I try hard to cut through the noise and get to the point without the usual word salad 😊

There’s already enough confusion floating around these days without me adding to it.

Glad the style works for you, my friend.

Cheers right back 🍁

Patricia Poohkay's avatar

Works real well Fred! I do so appreciate the clarity and the straightforward honest presentation. Thank you.

Peter Owen's avatar

Japan (as in the state) is selling off a lot of US bonds to finance oil import without hiking domestic prices to a level that would hurt the economy badly. So both the private AND the government is selling. Imported inflation drives the interest. It will continue like this for a long time.

Europe is not currently selling off US bonds (Trump has threatened severe consequences if Europe uses its financial bazooka.) However, Germans are now buying German bonds instead of US bonds. So when some countries are selling there is not tbe usual lot queueing to buy. Hence the rise in US bonds' yield rate. Which in turn is set to burn US economy badly for the next ten years. As a result they will most certainly print more, lots more, dollars. And the dollar will weaken. And so on.

Fred Ferguson (GeezerWise)'s avatar

Peter, good points.

There are clearly multiple forces pushing this...

Energy imports, currency pressure, domestic inflation, and now finally better returns at home.

What strikes me most is exactly what you said: when a major buyer steps back and nobody rushes to replace them, yields start doing the talking.

Bond markets can be brutally honest.

Jim Veinot's avatar

once more the U.S. is "hoist by its own petard." Japan is paying more for oil because of Iran. Fitting that the U.S. should cover the difference.

Fred Ferguson (GeezerWise)'s avatar

Jim, there’s definitely some irony in it.

Japan’s energy costs have been hit hard by Middle East instability, and higher oil prices have added inflation pressure at home...

one reason the Bank of Japan is finally moving rates higher.

Japan also relies heavily on imported energy, so these shocks land hard there.

The interesting part for me is this: geopolitics has a way of boomeranging.

Decisions made abroad eventually circle back through oil prices, inflation, bond markets, and borrowing costs.

The bill always lands somewhere.

Kalyrn's avatar

It’s not just oil, Japan is also trying to stabilize the value of the yen. This is another reason they have been selling.

Fred Ferguson (GeezerWise)'s avatar

Kalyrn, yes... good point.

Stabilizing the yen is definitely part of the story too.

A weak yen makes imports more expensive for Japan, especially energy, which feeds inflation at home.

Selling foreign assets and moving capital back into yen-denominated investments can help support the currency.

It’s one of those situations where several pressures are piling onto the same decision at once.

Peter Owen's avatar

Correct, and that translates directly into yen for dollars to buy resources of all kinds.

Brian Scott's avatar

A trillion in interest. That number is shocking and puts the USA in a very tight spot economically. I wonder what the business headlines will say when the USA misses payment to service just the interest owed. Not to mention the principle is not touched for years. Economic collapse?

Fred Ferguson (GeezerWise)'s avatar

Brian, missing an interest payment would be an earthquake-level event, so I suspect Washington would print money, borrow more, or inflate its way through before letting that happen.

But you’re right about the pressure...

a trillion dollars just to service interest is an astonishing number.

At some point the math starts making the decisions, not the politicians.

Brian Scott's avatar

Does not printing more money just put them deeper in debt and increase the debt servicing costs and the debt? No one wins and exposes the fault belief that it will all work out in the end.

Fred Ferguson (GeezerWise)'s avatar

Brian, that’s the trap in a nutshell.

Printing more money can help short term, but if overused it can weaken the currency and fuel inflation. Borrowing more adds to the debt and interest bill.

That’s why I keep coming back to the math... eventually the options narrow and none of them are painless.

The hope is they manage a slow correction instead of backing into a crisis.

Kalyrn's avatar

They could probably easily pay that if they taxed their extremely high earners appropriately.

Fred Ferguson (GeezerWise)'s avatar

Kalyrn, fair point...

there’s definitely an argument that tax policy is part of the conversation.

But I think the bigger issue is spending versus revenue over time.

Even very large tax increases don’t magically close trillion-dollar gaps if borrowing and interest costs keep compounding.

At some point, the system has to deal with both sides of the ledger.

Carol-Ann Lamothe's avatar

That does not make for a good outcome.

Fred Ferguson (GeezerWise)'s avatar

Carol-Ann, no… it really doesn’t.

Even if this unfolds slowly instead of dramatically, higher borrowing costs and financial stress rarely end with ordinary people coming out ahead.

Let’s hope smart policy shows up before the math gets too painful.

Shelley's avatar

Thanks for another clearly laid out article- reading it made me think of PM Carney and how his economist’s mind might be using shift to promote 🇨🇦’s investment opportunities . A very interesting read 🤗

Fred Ferguson (GeezerWise)'s avatar

Shelley, thank you 🤗

And that’s an interesting thought.

If there was ever a moment for Canada to look stable, predictable, and investment-friendly, this may be it.

Carney does tend to think several moves ahead on the economic chessboard.

We’ll see if Canada is ready to seize the opportunity.

Rebecca Lorentzen's avatar

The future is not going to look like the past. Hopefully stable minds can deal with the issues that will bring.

Fred Ferguson (GeezerWise)'s avatar

Rebecca, I think you’re exactly right.

We keep trying to solve tomorrow’s problems using yesterday’s assumptions.

The world is shifting fast... economically, politically, technologically.

Stable minds, clear thinking, and less ideology would go a long way right now.

Hopefully wisdom makes a comeback 😊

Kalyrn's avatar

Makes me think of the saying “Problems cannot be solved by the same thinking that created them.”