The US national debt just crossed $40 trillion, which means the federal government has officially doubled its IOUs in ten years. Congratulations to everyone involved. This is what financial genius looks like when you remove the part where someone actually has to pay it back.
Here is what happened: Congress spent money it did not have, the Treasury borrowed it by selling bonds, and now those bonds are paying interest rates not seen since 2006—right before that whole housing thing reminded us why interest rates matter. The 30-year bond is now yielding enough that lenders are actually interested in lending again, which is great news for the government’s ability to keep borrowing, and terrible news for anyone who thought this was sustainable.
The truly inspired part is the logic at work here. Every dollar spent is framed as an investment in the future, which is technically true if your future is “paying interest on money we already spent.” It is the financial equivalent of taking out a second mortgage to pay off the first one while telling yourself you are building equity.
So what does this mean for you? If you own Treasury bonds, congratulations—those yields are actually competitive now. If you are waiting for the government to magically reduce spending or raise taxes enough to matter, do not hold your breath. If you are just trying to figure out whether to refinance your mortgage, watch those 30-year rates. The government’s borrowing costs are now your borrowing costs. We are all in this adventure together.