Bad money decisions are coming home to roost for the US and Japan
The US Treasury market is in trouble, oil prices have been surging and the yen might slide again. Whatever Treasury Secretary Scott Bessent might have said, the United States government isn’t big enough to be “the house” that always wins when it comes to fixing global markets. Last week, the 10-year US Treasury yield briefly reached 5.04 per cent, the highest level since 2007, right before the…
The U.S. and Japanese governments are grappling with their mounting debt burdens, which threaten to spiral out of control despite their best efforts. The U.S. Treasury market is faltering, with the 10-year yield soaring to its highest level since 2007, even as the government attempts to stabilize it through massive buy-back operations.
Meanwhile, oil prices have been volatile, driven by geopolitical tensions in the Middle East and reduced demand from China. The yen has also weakened, despite joint interventions by Tokyo and Washington. Experts warn that the Western world's reliance on debt to maintain living standards is unsustainable, as low inflation has kept interest rates artificially low, allowing for deficit spending.
However, without addressing the structural issues plaguing their economies, governments are reluctant to make the necessary cuts or tax increases. The situation is exacerbated by the energy shock from the Iran war, which could exacerbate inflation in an environment already prone to it. With government debt now exceeding 100% of GDP, the challenge is to find a sustainable solution before the market loses faith and bond prices collapse.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
