James David Vance, Donald Trump’s running mate colloquially known as ‘JD Vance’ stated his worries about interest rates that may trigger the US bonds to fall into a “death spiral” and subsequently destroy the national finance.
Vance voiced his concerns about potential brooding on increasing bond rates by Trump’s opposition, claiming such people including international investors and war profiteers were attempting to tarnish Trump by “spiking bond rates.” His concern, more or less, is rooted in the management of USD 35 trillion debt that is the fourth largest federal expense in 2023.
Government spending on net interest incurred by debt would likely exceed government spending on defense and medical welfare, according to a bipartisan Committee for a Responsible Federal Budget.
“1.6 to 2 trillion in debt every single year in this country, getting added to the national debt… If interest rates go to 8%, and you’re actually spending way more to service the debt than you are on actual goods, services and infrastructure, …that can become a huge spiral,” explained Vance.
Many fear that other nations, if they so choose, may dump the US treasuries altogether by which the interest rates could soar to 8% due to the rise of bond yields and fall of prices initiated by the disparity in supply and demand.
However, Steve Sosnick of Interactive Brokers said Vance was merely perpetuating the “boogeyman” of the bond market since the foregoing issue has been around as an underlying concern for quite some time, citing Japan as an example where such fear is yet to transpire.
Sosnick also noted that Vance’s apprehension of the potential rate spike was not entirely insubstantial, although investors should consider such concerns with suspicion when they were raised by politicians as they would likely “raise problems without offering solutions,” appearing as scare tactics for the coming election.
