The big experiment that started in 2007 will eventually end. Governments have to spend to provide the basic services that governments provide ie education, health, defence etc. Eventually these things may have to take priority over supporting parts of private sector. And I want to explain in my own words why. Like in your own family or business the thing that will drive governments to change spending habits will be access to funds. Governments if they are lucky (like the US) have 3 sources of funds; taxes, borrowing and money printing. TAXES It is easy to understand how the ability to tax is limited, so spending from taxes is not unlimited. BORROWING There are some who believe that governments can borrow forever and in unlimited amounts. Obviously this would not be true if they were borrowing from lenders (lets call them "External Lenders") that can calculate the governments ability to repay interest from the taxes they raise. This should be self-evident because there comes a point when taxes can't be raised enough to pay interest. And as this point in time gets closer, interest rates should rise (to cover the extra credit risk)... not fall. But even though the ability to pay back interest is just math, the FED doesn't calculate the ability of the US Government to pay interest back. Rule number 1 the US can always pay back. Rule number 2 if the math disproves this, refer to Rule number 1. So as external lenders, who do calculate credit risk, choose not to lend to the US (ie buy treasuries) the FED increasingly becomes the only lender (ie buyer of treasuries). The math (on the ability to repay principal and interest) will eventually cause other buyers of treasuries to stop buying. As new treasuries are issued to fund the governments activities the FED has to buy these. As old treasuries (held by external lenders) mature (which is simply the Gov being required to pay back debt at the end of its term) the Fed buys new treasuries to give the government the money to repay the maturing debt. So maturing treasuries (gov debt) never matures and the lender to the US government over time changes from External Lenders (who care about the credit worthiness of the US government) to the Fed (who doesn't care and can create money to buy more). And this insn't just happening at the maturity of treasuries. Treasuries can be sold prior to maturity. If lots of external lenders sell treasuries then like any asset the treasury goes down in value. Because the interest rate stays the same, this has the effect of a higher interest rate to the holder of this treasury. This affects interest rates on the issuance of new treasuries. The US government can't have interest rates rising (remember issue of paying interest with taxes) so it buys these treasuries also. So is the ability of the US government to borrow unlimited? Yes it is while the Fed exists but it would require an explosion in the Fed balance sheet as issuance increases and the Fed becomes the only buyer. The only solution is if the Fed slows its buying and this means interest rates rising and accepting the pain of this. MONEY PRINTING Money printing has always existed in our fractional reserve system, but it has been tethered because the opposite, money destruction, also happens. Every time credit is issued in the system money is printed. When this credit is paid back money is destroyed. When you lend $100 of your money to a friend ,you take $100 of your money and give it to your friend who now has that $100. No money is printed. This is not the case when you lend from a bank. An example most can relate to: You buy a house for $500000, you give a $50,000 deposit to the seller. Your mortgagee bank takes a mortgage over your $500,000 house and the bank with a key stroke creates $450,000 for you to pay to the seller. This $450000 did not exist before you took out your mortgage. The bank does not have a corresponding amount of term deposits or other assets that it takes from to give you this $450000. When the mortgage is paid back to the bank the bank does not get to keep the $450,000. This credit is destroyed in the inverse of how it was created. This creation and destruction keeps money supply (from this type of printing) from exploding over time. The destruction always occurs. The bank only keeps the interest. When the government lends from its central bank, it is the same, a key stroke creates the billions of dollars. If the government ever paid back the money the inverse would occur it would also be destroyed. When it becomes clear that the money cannot be paid back or the debt is forgiven, this is monetisation and the mechanism that keeps money supply from exploding is gone. If so much debt has been issued that it can't be paid back from taxes and borrowing just makes the problem worse, what should the government do? Well ask any Bankrupt person and they will tell you that there is a point when they realised the problem could not be solved even if they could borrow more. The only way is accepting higher interest rates or default. They can't accept higher interest rates. The US will default and cents on the dollar will be paid to all holders of treasuries. It has happened to many countries in the past and it can happen in the US. It is just maths. Well done if you have gotten to here in my Silverstackers rant. One final point. What does this default do to interest rates? Well after a default the borrowing cost of the US government will be set by the markets and it will be much higher. So eventually the pain that comes from too much debt will have to be felt throughout the economy. I'm not saying that is is all going to happen tomorrow. But this is the path we have been on since about 2009. It isn't something that simply wont happen because it is a bad thing. Lack of understanding on how this works is what is driving the problem towards solutions like modern monetary theory (MMT). Maths says that this will eventually happen. A Biden win in the US will speed it up even more, but I think it will happen either way. I am not republican or democratic or left or right I am a believer in the truth.