Skip to comments.What if interest on the national debt skyrockets? Threat looms over Washington’s budget
Posted on 01/06/2014 7:36:03 AM PST by bestintxas
Despite the federal deficits recent decline, it remains large, and the nations growing debt threatens to quickly accelerate it to new heights.
During the past four years, the deficit has been historically high and federal interest rates historically low. Together, they have overshadowed the rapidly increasing federal debt. Now, with the deficit down from its heights and interest rates up from their lows, a looming menace is becoming clear: The federal governments increasing debt has created the equivalent of a large, new entitlement-spending program in the form of debt-service costs.
No longer a peacetime record, the deficit still remains very large. The fiscal 2013 deficit came in at 4.1 percent of gross domestic product (GDP). While much lower than its 9.8 percent peak in 2009, it is also still much higher than either its 40-year average of 3 percent, calculated by the Congressional Budget Office, or the fiscal 2007 level of 1.1 percent the last year before the recession. Had it not been for the large deficits of the previous four years, fiscal 2013s rate would have been the highest since 1992.
Unsurprisingly, these high deficits have exploded the federal debt. Since fiscal 2007, the federal debt held by the public has more than doubled in absolute terms, rising from just above $5 trillion to just under $12 trillion at fiscal 2013s close. It also increased sharply as a share of the nations economy, climbing from 35.1 percent of GDP to 72.1 percent, according to the Department of Treasury.
It is surprising, though, that the interest costs of this combination of rapidly increasing deficits and debt has been almost entirely muted by recent record-low interest rates.
(Excerpt) Read more at washingtontimes.com ...
We used to issue 30 year bonds to service our debt.
Under Clinton, these got shorter and shorter duration in order to save interest costs.
Fine if rates are falling or static, but that does not stay that way forever.
We have such a mountatin of debt now we are toast when rates go up.
That’s been my main concern for the last twenty years and every politician I have talked to have always pooh-poohed my concerns.
Declare a year of Jubilee, reset all national, business and personnel debts to ZERO, and get things working again.
it worked in the Bible.
How deep into the Earth would one have to dig to bury a single stack of 100 dollar bills whose total value was 17 trillion dollars?
Clue: the thickness of all denominations of paper/rag US money is identical.
I’ve feared this for years.
The markets seem content to swallow Ben & Janet’s fake money because there are no better alternatives.
But depreciated currency eventually wins out.
The real problem for an investor is timing the blowout.
I read it wrongly.
I thought it meant ‘public’ interest. As in what if people started tuning in and paying attention to this?
The response is: ANY republican who wants the WH in 2016, will focus on this, make it an issue. And will have economic experts on it now, and have a viable answer and then follow through
Anyone who does not do this is not serious about the WH
It would gain the youth vote and anyone interested in providing for the youth, which, given the prevalence of anti family and sex without commitment is not as popular as natural law would call for, but it is a winner. And beyond dem cheating range
You really want to steal their money?
They need to issue seven-minute bonds then.
.... Well the solution is quite simple ..... just sweep it under the rug and pass it on to the next administration.
I just finished up the Politically Incorrect Guide to the Great Depression and the New Deal. I would strongly folks go pull it out and read through. It’s a good bit of history, which doesn’t get covered. How the depression really started.....is a bit different than the long accepted version given by most history professors. The lousy strategy by Hoover...simply deepens the mess, and FDR did nothing to resolve the Depression.
I’d agree...we are repeating most of the same things that we did in 1927 and 1928....which triggered the fall of the banks eventually. The Fed figures deeply into the affair, for what they did then, and what they do now.
No taking from retirement funds, but, from the stunned and depressed attitudes on the college upperclassmen I visited with over the holidays and the discouraged parents with 24-26year olds living at home after attending and still paying for GOOD schools, second tier, kids whose parents and grandparents went to USNA, Cornell, Wharton
Not a whole lot of those people are retiring in anything near comfort
I’m not seeing it
Even if the interest on our debt went to 5%, it could ruin us. Isn’t around 5% the historic average?
The cost to rent (borrow) money is virtually zero. Think about that for a minute.
The cost to rent an item, like a house or a car is directly related to the value of that item. If the market cost to rent a house was zero, what would the value of the underlying real estate be?
So, what is the underlying value of money that can be rented for practically nothing? How long can this relationship continue and what will be the ramifacations when the true value of fiat currency is recognized?
“How long can this relationship continue and what will be the ramifacations when the true value of fiat currency is recognized?”
Only one thing is certain: A Republican POTUS or Congress will be in office when it hits the fan and will dealt the major body blows.
Dems have set them up, with assist from W.
I don’t know about that. For some reason 2015 keeps popping up in my head as the year of reckoning. I don’t think they can kick this can down the road much longer than 18-24 months.
I don’t want to steal anyone’s money, but the alternative is looking really bad. Basically a decent into a violent dark ages.