On PBS NewsHour on Friday, The New York Times Columnist David Brooks mentioned that the federal budget has the same kind of reliance on low interest rates that the Silicon Valley Bank (SVB) has had and that’s a particular problem because “inflation has been here” for a while.
Brooks said, “It seems to me that there are two immediate political things that are very relevant to politics and our broader national life. The first is, this — this bank communicated its investment strategy in a low interest rate environment, which we’ve had for 40 years, we don’t have anymore. And so, the A bank that invests a disproportionate amount of money in treasury bills will suffer all of a sudden, because it won’t keep up with inflation. And when you go from a low interest mentality to a high interest mentality, things start to break down. And the financial system collapses. But the other thing that can break is the budget, that we We borrowed and borrowed and borrowed, and we assumed interest rates were low. They’re not going to be low anymore. And inflation is here, at least for a good part of [a] while it seems. And so, all of a sudden, your debt payments are huge at the federal level and that takes away spending on all other things.”
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