What “a trump” does is not important, even the shittiest demagogues out there still rarely default on treasury and public debt like this. What’s way more likely is that they’ll fuck up the entire economy to pay off these debts, and use that as an excuse to cut the tiniest amount of public services and social welfare they accomplished in the last 20 years.
A default on public debt would impact Trump personally. On those matters you can bet that he works hard to cover his ass.
You’re assuming he actually give a fuck about any of that. He’s going to be in the office for three more years. He doesn’t need to worry about reelections. He’s going to spend that time making as much cash for his family and friends as he can, but any means he can. He absolutely doesn’t care if he trashes the whole economy in the process.
I understand that, but thrashing the economy is very different from thrashing the credit rating of the whole country. But I can see how perhaps I’m still in denial, looking back it is true that this regime has been worsen than my wildest imagination in all aspects
I mean just look at the debacle that it the war with Iran. There’s a reason why no single US president was dumb enough to do that, but here we are now.
That’s not true. Inflation is VERY relevant. If money is losing its value then you want to have as much debt as you can because it’s worth the most right now and will be worth less when you have to repay it.
It also means you don’t want to loan money unless the interest rate is very high or you’ll end up losing money.
If USD is devalued over time we’ll make bank in other ways, so not concerned about that. What’s more likely is higher inflation would demand higher bond yields, which means bonds are cheaper and Canada should buy even more of them. It does mean that current bonds lose value but if we hold them to term doesn’t matter much
This logic is dangerously complacent and ignores the actual mechanics of how economies fail. You’re assuming a smooth devaluation of the USD that conveniently boosts other assets, but that is not a guaranteed or even likely outcome at this point. An economic crash can lead to a rapid devaluation triggering a severe loss of confidence in US debt, not just higher yields on new bonds.
If inflation spirals then the Fed would be forced to hike interest rates aggressively to defend the currency, which would crush economic growth and likely trigger a recession. The idea that holding bonds to maturity makes losses irrelevant is a fundamental misunderstanding. Those losses represent destroyed capital and a massive opportunity cost. The government would be locking in negative real returns for decades while its debt servicing costs explode on new issuance. Canada buying more cheaper bonds in that scenario is like catching a falling knife. It’s not exactly a clever investment strategy. We’d be doubling down on a failing asset as the underlying economy and fiscal position deteriorate. It’s a recipe for a stagflationary crisis.
Why are we buying debt of a country headed into a recession/depression and massive inflation?
Because we know they’ll pay it one way or another, their recession/inflation is irrelevant
oh really? What is Trump’s track record on paying debts?
So far, for this kind of debt, 100%
A trump never pays his debts.
He hasn’t taken over the Federal reserve, YET. If the fed loses independence and trump takes over (which he clearly wants) all bets are off.
What “a trump” does is not important, even the shittiest demagogues out there still rarely default on treasury and public debt like this. What’s way more likely is that they’ll fuck up the entire economy to pay off these debts, and use that as an excuse to cut the tiniest amount of public services and social welfare they accomplished in the last 20 years.
A default on public debt would impact Trump personally. On those matters you can bet that he works hard to cover his ass.
You’re assuming he actually give a fuck about any of that. He’s going to be in the office for three more years. He doesn’t need to worry about reelections. He’s going to spend that time making as much cash for his family and friends as he can, but any means he can. He absolutely doesn’t care if he trashes the whole economy in the process.
I understand that, but thrashing the economy is very different from thrashing the credit rating of the whole country. But I can see how perhaps I’m still in denial, looking back it is true that this regime has been worsen than my wildest imagination in all aspects
I mean just look at the debacle that it the war with Iran. There’s a reason why no single US president was dumb enough to do that, but here we are now.
That’s not true. Inflation is VERY relevant. If money is losing its value then you want to have as much debt as you can because it’s worth the most right now and will be worth less when you have to repay it.
It also means you don’t want to loan money unless the interest rate is very high or you’ll end up losing money.
You understand that the value of the bonds goes down and we lose money when US currency gets devalued right?
If USD is devalued over time we’ll make bank in other ways, so not concerned about that. What’s more likely is higher inflation would demand higher bond yields, which means bonds are cheaper and Canada should buy even more of them. It does mean that current bonds lose value but if we hold them to term doesn’t matter much
This logic is dangerously complacent and ignores the actual mechanics of how economies fail. You’re assuming a smooth devaluation of the USD that conveniently boosts other assets, but that is not a guaranteed or even likely outcome at this point. An economic crash can lead to a rapid devaluation triggering a severe loss of confidence in US debt, not just higher yields on new bonds.
If inflation spirals then the Fed would be forced to hike interest rates aggressively to defend the currency, which would crush economic growth and likely trigger a recession. The idea that holding bonds to maturity makes losses irrelevant is a fundamental misunderstanding. Those losses represent destroyed capital and a massive opportunity cost. The government would be locking in negative real returns for decades while its debt servicing costs explode on new issuance. Canada buying more cheaper bonds in that scenario is like catching a falling knife. It’s not exactly a clever investment strategy. We’d be doubling down on a failing asset as the underlying economy and fiscal position deteriorate. It’s a recipe for a stagflationary crisis.
Unless Trump manages to succeed in completely collapsing their economy. (Whether intentionally or due to incompetence)