“The hike in bond yields and subsequent rise in mortgage rates caught some people off-guard since there was no comparable reaction after the Standard & Poor’s downgrade. But that took place in different economic times when the U.S. government had more room to maneuver.”
…
“”Inflation is the economic equivalent of a partial default. The debt was sold under a 2% inflation target, and people expected that or less inflation. The government borrowed and printed $5 Trillion with no plan to pay it back, devaluing the outstanding debt as a result,” he cautions. “Yes, this is not a formal default. And a formal default would have far reaching financial consequences that inflation does not have. Still, for a bondholder it’s the same thing.”
Having been burned by the U.S. government’s policies, investors perceive it as an increasingly risky borrower, just as Fitch (and S&P in 2011) say. As a result, they demand a greater price to loan the feds money—hence higher bond yields. And since 10-year Treasury yields serve as benchmarks for other borrowing rates, such as mortgages, that means higher cost for average Americans who have little say in D.C.’s financial shenanigans but have to suffer the consequences.”
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“”Such high and rising debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook,” according to the CBO.
That means unpleasant consequences not just for government officials, but for those of us who live in the economy they hobble. The government will have to pay more to borrow, and so will we. We’ll do so in a country less prosperous than it should have been.”
https://reason.com/2023/08/11/the-u-s-governments-bad-credit-means-higher-costs-for-us-all/