TL;DR

Ignoring a $3.7 trillion debt increase is like ignoring a giant hole in a sinking ship. Tax cuts for the wealthy and cuts to social programs will likely lead to an economic crisis, impacting everyone.

Story

The $3.7 Trillion Tax Cut: A Titanic of Debt Headed for an Iceberg

John, a retiree relying on his savings, saw his nest egg shrink after the 2008 crisis. Now, another storm is brewing. Congress is poised to extend the 2017 tax cuts, adding a whopping $3.7 trillion to the national debt. This isn’t new money for growth; it’s an extension of existing cuts, mostly benefiting the wealthy.

How the Sausage Is Made (and How It’s Poisoned):

The tax cut extension is like a Ponzi scheme: it keeps going as long as new money comes in. The problem? There isn’t enough to offset the massive deficit increase. Spending cuts are on the table, mainly targeting social welfare programs and clean energy initiatives—these are the life rafts for millions who would feel the impact first. Politicians, beholden to donors, are pushing for these cuts while ignoring the consequences.

The Human Toll:

John’s fears aren’t unique. Millions face increased financial instability due to this reckless fiscal policy. Lower-income families may see less support, hindering education, healthcare, and even food security. The economic consequences will spread.

Lessons Learned (the Hard Way):

• Red Flag #1: Massive deficit increases without a plan to offset them. Remember 2008? This isn’t just an accounting problem; it’s a recipe for economic catastrophe.
• Red Flag #2: Tax cuts that disproportionately benefit the wealthy while cutting social programs. This isn’t trickle-down economics; it’s a drain-down from the poor.
• Red Flag #3: Politicians prioritizing short-term gains over long-term fiscal health.

Conclusion:

The calmness in the Treasury markets right now is either blind faith or a deceptive calm before the storm. The debt is building like a pressure cooker. The explosion could be imminent.

‣Gilt yields: The return on UK government bonds. A rising yield means investors are demanding higher returns due to increased risk. ‣10-year yields: The return on US government bonds with a 10-year maturity. These are often seen as a barometer of overall market sentiment toward risk.

Advice

Diversify your investments and don’t rely on government promises. Pay attention to the true costs of political decisions. Don’t just hope for the best; prepare for the worst.

Source

https://www.reddit.com/r/investing/comments/1kmgc3m/why_arent_treasury_investors_sounding_the_alarm/