Joe Lonsdale: America’s $2 Trillion Problem No One Talks About

Amid the recent stock market uncertainty, investors may be overlooking moves in the bond market. That would be unwise, as the bond market represents capital invested primarily for safety. Currently, bond yields have finally started to come down, despite first rising after the Federal Reserve cut interest rates.

With lower yields, investors find bonds less attractive compared to the prospective returns of “risk-on” assets such as stocks. Unless, of course, there’s a flight to safety.

However, the bond market itself may be an unsafe space for investors. Soaring yields over the past few years have caused the U.S. Treasury’s borrowing costs to soar. The interest on the federal debt topped $1 trillion last year, and is closing in on $2 trillion.

Meanwhile, foreign nations are either selling U.S. government bonds, or allowing current holdings to mature. And they’re holding their wealth in different assets instead. That’s leaving fewer big players to absorb U.S. debt.

Over the next five years, over $28 trillion of the $37 trillion of national debt will need to be rolled over. Much of it will be at a higher interest rate. That could lead to soaring debt costs, which could drag on the economy and cause America’s debt-to-GDP ratio to soar.

To see the full implications behind this problem, click here.