State of the U.S. Treasury in early 2025

[L-5Player]

Hi all, my first new thread, let's hope I don't get slaughtered for it by mentioning any verboten topics I'm not aware of.

A bit of context - I'm 57M, married, retired four years, two kids in college with 529s covering their costs. I'm a DIY investor for 35 years. Our portfolio target allocation of about $4.7M is 70/30 with 12-18 months' of cash in Treasury money market funds being part of the 30%. We use this for living expenses.

I'm very active on Reddit, where the topic I'm posting is being discussed feverishly. I come here (and to Bogleheads) to be among the adults and read more advanced topics with generally better insight.

Yet it seems that on neither of these forums is anyone discussing concern about what's going on at the U.S. Treasury. Putting politics aside - difficult as that is - is anyone paying attention and making changes to your allocation? Or are we assuming that the U.S. and its debt commitments are sacrosanct, as they have always been, and that worrying is silly and pointless? Respectfully, I'll be honest: I think that's a bit näive.

We have a lot of exposure to cash, as do most retirees. Family bank accounts, Treasury money market funds, 529 cash positions, etc. - and I am nervous. Too much is being dismantled and too quickly, and there is no apparent conventional oversight. There could be absolutely dire consequences. How are you reacting to this?

 

[jim584672]

If they default on US debt the markets will collapse and the people in charge will lose a ton of money. No one wins and therefore they will not let it happen.

 

[L-5Player]

If they default on US debt the markets will collapse and the people in charge will lose a ton of money. No one wins and therefore they will not let it happen.

That's the rational take for sure. But on 2/9 one of the people in charge said this:

"We're even looking at Treasuries. There could be a problem - you've been reading about that, with Treasuries and that could be an interesting problem. It could be that a lot of those things don't count. In other words, that some of that stuff that we're finding is very fraudulent, therefore maybe we have less debt than we thought."

 

[GravitySucks]

The only worry I have about treasuries is rate risk not default risk.

Stay off Reddit. (Im on there way too much myself.) It’s full of reactionaries and most of the posters in finance subs have little understanding of the topics they are posting about.

 

[copyright1997reloaded]

I predict this thread will be closed fairly soon.

Back to the topic:
We have 36.46 trillion in direct federal debt, and aproxiately a 2 trillion dollar deficit adding to that enormous debt.

The easiest course is the one taken - to simply ignore the problem and issue more debt/"print" more money. Do I think we will default on treasury debt? No. Why would we when we can just print more money (just bits in a computer).

I own a lot of treasuries - my worry isn't them not being paid, it is that the dollars used to pay me back will be worth less and less in terms of buying power.

 

[jim584672]

I don't want to comment further and get the Porky.

 

[Qs Laptop]

Too much is being dismantled and too quickly, and there is no apparent conventional oversight. There could be absolutely dire consequences. How are you reacting to this?

OK, so explain what is "going on at the U.S. Treasury?"

What is the concern?

(I have an idea what is trying to be said here, but would appreciate a straight-up explanation.)

 

[Gumby]

I have a substantial holding in US Treasuries, so a default would definitely affect me. The conventional wisdom is don't invest your money in things where you could lose it all. So if XYT Corp. seems to be teetering on the brink of Chapter 11, I don't buy its stock, because I'll be wiped out. But a default on Treasuries would have so many knock on effects that I can't identify what would be a safe alternative. Maybe gold buried in the back yard? Beans and bullets? I sure don't know right now, nor do I think anyone else can know. And since I don't know, I'll stop preemptively worrying about it. The best investment advice was already posted - stay off reddit.

 

[pb4uski]

I'm not that concerned about Treasuries credit worthiness. I am very concerned that the ready-fire-aim actions that we are seeing will result in a lot of collateral damage to the US economy that have not been given any consideration at all and will plunge us into a recession.

As an aside, in the 1990s in a fervent desire to reduce headcount my employer offered a buyout program.... voluntarily quit and receive 6 months pay. Many excellent employees that had marketable skills took the money and moved on to greener pastures. Meanwhile, the deadwood who knew they had no chance to get a job elsewhere stayed. Huge brain drain. Stupid idea IME and an example of the collateral damage that I'm talking about.

 

[FlaMariner]

I am very concerned that the ready-fire-aim actions that we are seeing will result in a lot of collateral damage to the US economy

Do you have any examples of what you mean by "ready-fire-aim" and "collateral damage"?

Everything I read seems to be about things that help keep us out of a recession.....and grow the economy...some long term, some short term.

Here is a few from cruising the WSJ the last couple of weeks.....

• major investments coming to the USA from other countries (Japan last week, AI investments the week before)
• energy focus to produce more oil in the USA
• scrutinizing trade policies to get more stuff made in the USA and more of our stuff sold overseas (ex: European tariffs on USA car imports are much higher than what USA charges Europe, Canada does not allow USA banks in but USA allows Canadian banks in)
• Federal downsizing to decrease Federal deficit

 

[Gumby]

You can have laudable goals and still really botch the execution.

 

[Jerry1]

This is the type of thing I always wondered about while working. Many things that were done seemed to be ill thought out. Many times it seemed that if we waited and planned a little better, things would have gone better. Conversely, I also wondered if there wasn't a push from the CEO to get it done "today" if it would have ever happened. Of course ideally it would be better to do things in a planned thoughtful way. Unfortunately, waiting for the right time to do things tends to equate to things never getting done. The current situation is stressful for sure, but I don't think there's anyway to reign in government spending that won't be stressful, chaotic and disliked by some.

 

[Koolau]

If they default on US debt the markets will collapse and the people in charge will lose a ton of money. No one wins and therefore they will not let it happen.

As long as a sovereign state can print money, there's no need to default. Having said that, as some point smart nations will stop making loans if all they get back is worthless paper - yet another problem beyond the scope of this issue.

 

[Koolau]

That's the rational take for sure. But on 2/9 one of the people in charge said this:

"We're even looking at Treasuries. There could be a problem - you've been reading about that, with Treasuries and that could be an interesting problem. It could be that a lot of those things don't count. In other words, that some of that stuff that we're finding is very fraudulent, therefore maybe we have less debt than we thought."

I'm starting to (almost) ignore such statements. I think it's more "thinking out loud" than serious talk. Of course, there is always a possibility that there is a grain of truth in the contention (who knows - with that much money floating around, would it surprise anyone that there is some fraud in the system - after all, we don't audit Treasury AFAIK.)

 

[Koolau]

The only worry I have about treasuries is rate risk not default risk.

Stay off Reddit. (Im on there way too much myself.) It’s full of reactionaries and most of the posters in finance subs have little understanding of the topics they are posting about.

Thank goodness we have no reactionaries here!

 

[Koolau]

I own a lot of treasuries - my worry isn't them not being paid, it is that the dollars used to pay me back will be worth less and less in terms of buying power.

That's seems to be a given. Our money lost, (what?) 20% of its value in 4 years? I realize there are many issues at play in inflation, but printing money to cover gummint debt seems pretty inflationary to me but YMMV.

 

[GrayHare]

The spike in gold prices says someone somewhere is nervous. Maybe they are smart. Or, maybe they also bought at the short-lived $800 peak in 1980.

 

[SnowballCamper]

We have a lot of exposure to cash, as do most retirees. Family bank accounts, Treasury money market funds, 529 cash positions, etc. - and I am nervous. Too much is being dismantled and too quickly, and there is no apparent conventional oversight. There could be absolutely dire consequences. How are you reacting to this?

I'm glad the pendulum is swinging back. I think it's not really possible to dismantle $36 Trillion of debt too quickly.

 

[Koolau]

I'm glad the pendulum is swinging back. I think it's not really possible to dismantle $36 Trillion of debt too quickly.

What's the old saying? When you're in a hole, at least stop digging.

 

[rembrandt]

There has been an order to stop minting pennies. They cost more than they are worth. I will miss them.

 

[Jerry1]

There has been an order to stop minting pennies. They cost more than they are worth. I will miss them.

Everyone needs to just release them from the jars, or whatever, they keep them in at home.

 

[rembrandt]

Everyone needs to just release them from the jars, or whatever, they keep them in at home.

Yes. Set them free!

 

[RetireBy90]

I think the only way to get the debt paid is to pay with inflation. We had 17 years of zero or near zero rates. Our mortgage is 2 3/8%. That isn’t sustainable. Perhaps there is a way to repay $36T but I don’t see it unless you inflate. Any others smarter than me with other ideas ?

 

[Koolau]

There has been an order to stop minting pennies. They cost more than they are worth. I will miss them.

Rant not aimed at you, rembrandt.

I simply never understood the issue that a penny costs more than a penny to make. A penny is not a store of wealth like a gold or silver coin. It's made to transfer wealth physically - unlike using zeros and ones as in much of today's transfer of wealth.

Pennies, for all intents and purposes are indestructible. 100 year old pennies are still mostly useable. Their per use cost must be infinitesimally small. So if they cost 50 cents to make, the only argument is whether they are useful or not. A case can be made that they are no longer useful. (I don't buy that, but I understand the argument).


Sorry. End of rant.

 

[SnowballCamper]

I don't fully understand the mechanics of how inflation reduces the debt. Is it something like increasing the money supply to repay the debt with inflated dollars? How does the government increase the money supply without increasing spending/debt?

Step one is to reduce the spending down to revenue levels.