China and Japan hold the mortgage on our country, since they own so many of our bonds, and they will continue to determine what our interest rates will be.
At present, China and Japan are willing to buy our debt at 2% interest, since our current government supports free trade, so that China and Japan can continue to flourish economically.
However, the two leading candidates for the 2016 presidency — Donald Trump and Hillary Clinton — are anti-free trade, with Donald Trump having already attacked China as our economic enemy for exporting more to us than we export to them.
If Hillary and the Donald become the two candidates with the possibility of leading the U.S. during the next four years, expect China and Japan to rethink their generous policies of accepting our Treasury notes at a mere 2% interest rate.
And if Donald Trump, who apparently has no ability to control his outbursts, starts excoriating the Chinese with even a tenth as much venom as he’s been attacking Ben Carson with, who knows what Xi Who Must Be Obeyed will do in retaliation?
Will China demand 3%, 5%, 10% interest rates to buy our Treasury bills, which we must sell week in and week out or go bankrupt?
This is much more interesting to contemplate than whether Janet Reno will raise bank deposit rates 0.25% next month. But don’t expect any economists to do so.
These countries are perfectly happy with a 2% rate of return because their own currencies aren't nearly as strong as the U.S. dollar. I don't see that changing anytime soon.