“…When you lend money (buying a bond, for example), you have to trust the person you lend to. As your level of trust goes up, you accept lower interest rates, because your risk of loss goes down…”
“As interest rates decline, borrowers go deeper into debt. But as the quantity of debt increases, the quality decreases.”
As long as bond yields are going down, borrowers can afford to borrow more. But when they go up… woe to the debtor. He won’t be able to repay his debt.
Then woe to the lender; he won’t get his money back. And woe to the central banker who tries to stand in the way of the market. And woe to the investor who buys bonds and fails to see all this woe coming his way.
And woe to the holders of US bonds.