Remember, foreign entities purchase more than HALF of those bonds each year. US citizens buy only 13% of them! So really, it leaves our government with two options, neither of which are good.
First, it can simply print more dollars to pay for our nation's growing indebtedness. But that will increase inflation even more. Why? Because it will flood the market with even more dollars (chasing a limited amount of goods and services), making all of our problems worse.
The second way to pay for our debt is to attract buyers of Treasury bonds by raising the interest rates they pay. And this will not be one of those Fed decisions where it gradually raises rates. Rather, the Fed will be forced to hike interest rates dramatically and immediately, and that will of course raise interest rates on homes, cars and everything else that is purchased over time, on credit.
It's either one of the two, or we won't be able to finance our reckless government spending. And you know, despite all the talk from politicians, spending cuts are not happening anytime soon.
So now let's imagine a world where the petrodollar no longer exists.
Here Then is What Our Future Will Look Like
Higher interest rates could lead to a cycle of ever more inflation.
A dramatic increase in the cost of buying a home.
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