Government borrowing costs around the world have leaped to their highest in years in recent days, reflecting fears that war, demographic decline and the imponderable consequences of technological change are all stretching Washington’s finances to breaking point.
That’s spilling over into financial markets in Europe, too, because European governments have to compete with Washington for the global pool of savings. And that competition has gotten a lot stiffer this year as U.S. tech giants have borrowed hundreds of billions of dollars in pursuit of artificial intelligence-related riches.
*Germany’s 10-year borrowing costs, which set the tone for the rest of Europe, hit their highest since 2011 earlier this week, after fears of inflation and a widening U.S. budget deficit drove the benchmark U.S. 30-year Treasury bond yield — how much investors get back when they lend to the government — to its highest in 19 years. *
France’s failure to correct course over the years has steadily eroded the confidence of investors, who now demand higher costs to buy French bonds than for similar Italian ones.
I think the shortage of capital would not be limited to Europe but would be a world wide problem.