America’s War on Itself

  • Cheaper Borrowing Rates. Bond yields go down when there is strong demand. Or to put another way: the cheaper the bond value is, the higher your potential yield is. The government promises to pay back the bond value plus interest rate over the determined period. So, in the first place, it is in the interest of the government to keep demand high so that their payout is lower for each bond. In the second place, increased demand means more borrowed money for the government to invest.
  • Lower Tax Rates. If the government can access liquidity from selling bonds to foreign countries, they do not need to raise taxes. Lower taxes increase earnings for American businesses. It also increases the strength of the American dollar relative to other currencies. Thus, the cycle of buying cheap products from overseas continues!

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