When the Chinese stop buying our bonds

That’s the answer to the question posed by Bob Laszewski in a post this morning; to paraphrase:
When will the US get serious about controlling health care costs?
Right after the bond market collapse…

Health care is the single largest contributor to our deficit, as well as being a huge drag on our international industrial competitiveness. For now, foreign countries and investors are seemingly fine with the historically-low rates of return they get from governmental bonds.
For now.
But not forever.
When the Chinese – or the Germans – or the Scandinavians – decide they want a better return, we may well see the collapse of the bond market. Ivestors will demand much higher returns, which will lead to intolerable budgetary pressure as debt service costs skyrocket.
In turn, this will force us to adopt draconian measures to rein in spending.
Which will – inevitably – lead to big cuts in Medicare, Medicaid, Part D, and other entitlement programs.
What does this mean for you?
It’s not a question of ‘If?’ but ‘When?’

2 thoughts on “When the Chinese stop buying our bonds

  1. No problem, we will just have QE3 or QE4, right? We’ll just keep buying our own bonds and writing them off the books like the Fed just agreed to do for another 800 billion. So where’s the problem?

  2. It’s about time people are talking about this. All the BS, fake stimulus plans the Democrats and Republicans propose are all fluff. Unless our country starts building factories here, producing goods, tying the dollar to Gold again, and put the Glass-Steagall Act back in place, we are doomed.