>What does this have to do with anything? The problem with too much US debt is that we have to make interest payments on that debt, which now makes up ~10% of the annual budget
Where are those debt repayments going? The majority go to US citizens. That's the point. Government debt are assets (read: wealth) to the owners of the bond.
It's astonishing to me how many times people fail to look at both sides of an economic transaction. It's like Ray Dalio talking about China weaponizing their treasury holdings yesterday. Yeah, China is going to "hurt" the US by selling bonds it bought for $1000 to someone else for $700. Who does that hurt again? Not the US; the debt repayment remains the same, no matter the holder.
>It's also going to get a lot worse if investors start to worry the US might default on its debts and demand higher yields on return.
You're missing a part of the logic here: interest rates are low because there is high demand for these instruments. It's easy to talk about some hypothetical scenario where people "demand" higher returns[1], but in reality, people the world over are lining up for US debt and many other investments that pay far less than treasuries (speculative equity, for example). Creditors don't get to choose their returns; they are at the mercy of those putting the capital to work.
[1] I'm sure you, as do I, want higher returns right now. How do you intend to demand this?
Where are those debt repayments going? The majority go to US citizens. That's the point. Government debt are assets (read: wealth) to the owners of the bond.
It's astonishing to me how many times people fail to look at both sides of an economic transaction. It's like Ray Dalio talking about China weaponizing their treasury holdings yesterday. Yeah, China is going to "hurt" the US by selling bonds it bought for $1000 to someone else for $700. Who does that hurt again? Not the US; the debt repayment remains the same, no matter the holder.
>It's also going to get a lot worse if investors start to worry the US might default on its debts and demand higher yields on return.
You're missing a part of the logic here: interest rates are low because there is high demand for these instruments. It's easy to talk about some hypothetical scenario where people "demand" higher returns[1], but in reality, people the world over are lining up for US debt and many other investments that pay far less than treasuries (speculative equity, for example). Creditors don't get to choose their returns; they are at the mercy of those putting the capital to work.
[1] I'm sure you, as do I, want higher returns right now. How do you intend to demand this?