Vigilante groups potentially targeting Donald Trump?

Vigilante groups potentially targeting Donald Trump?

The escalating national debt under the Trump administration is causing concern among economists and the general public alike. Projections show that the debt is set to increase by over $4 trillion over the next decade due to the administration's spending measures, reaching $37 trillion by mid-2025 and potentially surpassing $52 trillion by 2035[1][3].

This growth in debt puts pressure on interest rates, causing borrowing costs for businesses and consumers to rise. Mortgages, credit cards, and loans become more expensive to service[1]. By 2024, interest payments on the debt are projected to reach nearly $880 billion annually[3]. This significant amount consumes a growing share of the federal budget, potentially exceeding spending on Medicare or national defense, limiting government flexibility for other programs[3].

Higher interest rates can slow wage growth, squeezing consumer purchasing power and increasing financial strain on households, particularly lower- and middle-income families who also face rising costs from tariffs enacted during this period[1][2]. The tariffs generate government revenue that could help reduce deficits but also function as a regressive tax that raises consumer prices, exacerbating cost-of-living pressures across income groups[2][4].

Public concern is high, with many Americans fearing recession, job loss, and difficulty affording basic needs like healthcare, food, and bills[4]. Credit rating agencies have downgraded US debt partly due to concerns about the rising debt path, signalling increased risk and potential future financial crises if corrective action is not taken[1]. Analysts warn that these trends may burden future generations with debt repayment obligations and constrain economic growth[1].

The term "bond vigilantes" was coined by Ed Yardeni in the 1980s, referring to investors who are hawkishly vigilant against fiscal or monetary policies that they consider inflationary[5]. If the Trump administration runs excessively stimulative fiscal policy, it could cause the bond vigilantes to push yields up to levels that create problems for the economy[6]. Yardeni suggests that the return of the bond vigilantes could be imminent[7].

Indeed, the yield on 10-year Treasuries has surged from around 3.6% to above 4.4% since mid-September[8]. This upward move has been unusually sharp, reflecting market concerns over the long-term sustainability of US government debt[8]. In 1993-1994, US 10-year Treasury yields leapt from 5.2% to over 8.0% due to fears over the Clinton administration's debt-fuelled spending blitz[9].

The global impact of rising US debt is not limited to the United States. More than 50 developing countries already spend more than 10% of revenues on debt servicing costs[10]. In Kenya, deadly protests erupted this summer due to a debt crisis that saw interest payments swell to almost 60% of total government revenues[11].

In conclusion, the expanding debt under the Trump administration may lead to higher interest rates, slower wage growth, greater federal interest payments, increased cost of living and inflationary pressures, heightened risk of credit downgrades and financial crises, economic vulnerability, and recession fears among the public. These factors collectively pose risks to long-term fiscal stability and broad economic wellbeing[1][2][3][4].

The unpredictable fiscal agenda of a second Trump term could take the US into "uncharted territory"[2]. Some suggest the return of the bond vigilantes is imminent[7]. As the US national debt approaches 100% of GDP, standing at $26 trillion, it is crucial to address these concerns to ensure a stable and prosperous economic future.

References:

1. CNBC
2. The Guardian
3. Congressional Budget Office
4. Pew Research Center
5. Investopedia
6. CNBC
7. Bloomberg
8. CNBC
9. The Balance
10. Oxfam
11. Al Jazeera

Investors, including bond vigilantes, may escalate yields due to concerns about the Trump administration's excessive spending and rising debt, which could reach $52 trillion by 2035. This potential inflation could increase borrowing costs for businesses and consumers, causing further strain on households, particularly lower- and middle-income families who are already grappling with rising costs from tariffs.

Moreover, the growing national debt may lead to higher interest payments on the debt, potentially exceeding spending on Medicare or national defense, thereby limiting government flexibility for other programs. This significant amount, consuming a growing share of the federal budget, could be invested more productively in the economy, such as in gold or other assets, to generate sustainable growth and promote long-term fiscal stability.

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