Foreign Governments Sell US Debt

  • I recently read a CNN article titled: "Global central banks dump U.S. debt at record pace". It details how they have been reducing the amount of US Treasure bonds they own. At an accelerating pace. That's something that should concern us. In fairness, they do point out the individuals have increased the amount of treasury bonds they're buying, but that can't offset the central banks forever.

     

    Why is that important? For a couple of reasons. First, it means that the day when the U.S. Government (that means you and I) will have to pay higher rates to borrow money is getting nearer. When that happens it will be harder (impossible?) to continue to provide all the services that we've been getting without massive budget deficits.

     

    Second, higher interest rates for the government will mean higher interest rates for you and I. On virtually any borrowing we do. Home, auto, student loans, credit cards. Any borrowing we do. It'll be easier for those with good credit scores, but even they'll pay more.

     

    What should you do now? As I've said before, it's time to pay off any debt you can. Even if it means some sacrifice now. Very few of us like to make sacrifices. But now might be the time to make painful spending cuts or even take a part-time job to whittle your debt load.

     

    You'll reap the rewards later. I don't know when, but interest rates will increase sooner or later. They can't stay at these historically low rates forever.

     

    Keep on Stretching those debt-free Dollars! Gary

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