Bond Vigilantes Powerless Against America's Soaring Debt

In the early ’90s, rising bond yields due to budget deficits influenced Washington’s fiscal decisions. Now, despite a $1.5 trillion budget deficit and soaring federal debt, bond markets may not hold the same sway. Current federal spending is hard to cut, and significant tax hikes seem unlikely. Facing limited options, the US might resort to inflation or financial repression, hurting savers and benefiting the government. Unlike the prosperous late ’90s for bond investors, upcoming years look challenging.