Stellar fucking caption image for the cover story Undisc's future minions created this week:

I like how the caption got everything: doom, percentage sign turned to overheat, screws flying, the plumbing of global finance

Some people do think that bonds will blow up (or are blowing up??) #1588691, #1590694

Five years ago borrowing costs were so low that public debt looked almost costless. Today, with investors dumping their bonds, many big rich-world governments pay more to borrow than at any time since the 1990s or 2000s. Because the public debts of big advanced economies are about double, relative to GDP, what they were at the turn of the century, the result is immense pressure on budgets.

Even before the latest bond sell-off, their governments were forecast to spend 8% of tax revenues on net debt interest this year, as ageing populations and the threat of war are creating pressure to raise spending. Now they must pay still more to refinance their past debts,

That is the unspoken problem with high gov indebtedness... you, sort of, take away flexibility/options from your future self.

Ironically, some of this year’s bond-market sell-off is good news, as we report. America’s economy is booming. Jobless claims are low; economic growth may be running at an annual rate greater than 3%; and productivity growth appears strong. This is encouraging investment.

We don't have to worry; AI will (somehow?) save us.

"Bond investors, gazing far into the future, perceive the growing danger that governments will use inflation to pick their pockets."

Downsides:

• "America is learning that its AI-fuelled expansion will not much help it cope with its debts, because interest costs rise in tandem with growth."
• "The federal government’s annual budget deficit of about 6% of GDP is unsustainable."

Europe is where the danger of a debt crisis looms largest. The AI boom is raising its cost of capital but, in contrast with America, it is enjoying far less of a boost to economic growth.

As always with ze Europoooreans #1590714, #1580878

Its energy-importing economy is suffering from high fuel prices, and will suffer more if the winter is cold, owing to a probable global shortage of liquefied natural gas. Though some prudent governments—including those in Germany, Scandinavia and Switzerland—have their budgets in order, Britain, France and Italy are wobbling.
Britain already suffered a bond-market revolt in 2022. Chastened, it corrected course, but its debt-to-GDP ratio is still rising and its politicians specialise in postponing spending cuts, as with a recently promised pension reform. Italy’s net debts are fairly stable, but, at 129% of GDP, too high. It is fragile and could break in a panic.

We all know (or at least think we know) how this ends:

A run on French bonds could happen. If it does, the government might respond not with belt-tightening, but by demanding a bail-out from the European Central Bank (ECB). Countries are supposed to get their budgets in order before the ECB buys their debt, but in practice the guardrail against bail-outs is weaker than a decade ago

It would be a mistake for central banks to bail out governments which refuse point-blank to balance the books. Their job is to unblock financial plumbing, not to underwrite decades of reckless borrowing.

lol, it's very cute that The Economist leader/opinion article authors belive that.

The best path forward in France and elsewhere is for politicians to explain to their electorates that public debt must be under control, and that together they must do whatever it takes

Good luck with that

archive: https://archive.md/DSMay