$10 trillion in Treasury Bills will be refinanced this year. $4 trillion in new government and corporate borrowing. Guess what happens then . . .?

Photo below - the "Joad" family (not their real name) ponder the loss of their home and retirement savings as they take to the family SUV in search of new opportunities.

Investment advisors have been warning us – for more than a year – that corporate borrowing to build ginormous AI centers is “unsustainable” and “has no immediate prospect of payback”. AI has eaten billions in capital for the last several years, and will do so again in 2026.

But the bigger story is US Federal debt. $10 trillion of that $38 trillion will come due this year, and need to be flipped over into new treasury bills. Repayment/retirement is not an option. All those low-rate treasury bills will be replaced with stuff with MUCH higher interest rates. Recently issued 10 year treasuries yield 4.3%. And this is likely to go higher on April 29th if the Fed raises rates again, as some expect.

Higher interest on $10 trillion may not sound like a big deal but it amounts to $100+ billion a year in extra government expense. Plus, there’s the $2 trillion in NEW debt, which will also carry a yield of at least 4.3%. That’s another $90 billion interest hit. Let’s round it off and call this a $200 billion budget crater that Trump and congress aren’t talking about.

How do you think this $200 billion problem will be solved? Budget cuts? Tax hikes? Or more and more federal borrowing?

I know this is a numbers heavy post today, and I’m sorry. Let’s just keep the big picture in mind. Interest alone already costs us $1.1 trillion annually, and this will jump by hundreds of billions every year as far into the future as we can see. This could have several possible outcomes – possibly all 3 at the same time.

1 – Big shot investor money flees the stock market (our 401K and IRA retirement investments) to seek shelter in high yield treasuries and corporate debt. This usually happens when interest rates rise.

2 – inflation roars back, as federal spending snowballs. Too many federal dollars chasing whatever our economy actually produces as well as imports from abroad. iPhones. Sushi. Cars. Solar thing-a-ma-jigs.

3 – Corporate America may have to write off trillions in AI investments, leading to a collapse of share prices. Budget cuts. Layoffs. Bankruptcies. The Federal Reserve USUALLY responds to recessions like this by borrowing even more to “stimulate” a recovery.

People who took econ 101 are nodding in agreement. Disgruntled Gen X-Y-Z workers are smirking in satisfaction at retired Boomers, because they don't realize they're the ones in the crosshairs for job cuts.

China and India no longer consider US Treasuries a safe investment. If there are much higher yields, does that persuades them? Maybe.. Saudi Arabia and adjacent middle east oil sheikdoms alone can’t buy trillions and trillions in new US treasury debt. We could be entering an era of when the rest of the planet dismisses America as bad investment. This could be worse than the dot.com crash, 9/11, and the 2008 housing crash.

Or not. DC politicians aren't talking about this problem. They're too busy trying to ensure their re-election in the midterms. They aren't talking about what happens next and continues to operate on “business as usual”. These are the peoples who brought us the $38 trillion accumulated debt in the first place.

I’m just sayin’ . . .


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