The interest on the US debt in 2011 was $454,393,280,417.03. If interest rates doubled, that amount would double to almost a trillion dollars.
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America is bankrupt. Obama knows it, Bernanke knows it and the banks know it. But they are hiding the truth so the elites can get out of Dodge with their loot before the average uninformed Joe, the one that still believes global warming is real, wakes up and realizes his money will soon be worthless.
But all the trendy-lefty economists know you just have to print more dollars to cover it. What could possibly be wrong with that?
Some gallows humour:
I see your point and I also want to cut spending and the debt.
However, the interest for 2012 was 359M, down from 454M in 2011, a 20% reduction in interest paid.
Also, isn’t operation twist lowering the total interest paid in the future by buying long term debt at historically low interest rates?
So – yes if interest rates went up it would be very bad because interest payment would be 1/3 of government spending.
But for the next year or two I think interest will be lower than 2011.
Interest rates will stay at zero (more or less) for the near to mid term because (a) they are set by the Fed and it can do whatever it wants, and (b) America would be instantly bankrupted if they did go up.
Well actually, America is bankrupted already… I meant America would end up defaulting on its debt repayments. Their only option is to inflate their way out of the crisis.
I agree with you Will.
Hyperinflation is coming our way, and the average punter will be the one who get it in the neck, just like in the 1970′s. That’s the only way to get rid of the government debts without default. If the Fed did put interest rates up, the US (and world) economy would have a heart attack.
Let’s say I agree with you in the sense that it’s a plausible worst case scenario. It’s curious how the precautionary principle is so selectively applied to potential future problems…
Don’t forget compound interest. The amount would effectively more than double. Hence the easy money policy of the Fed to monetize the debt. Inflation is coming.
I agree that we would be seeing inflation in a big way if all the Fed funds were actually going into the economy. But the money is just going to the banks and siting there, not really doing anything. Yes, the Fed is dramatically expanding the money supply. But the velocity of money through the economy is slowing.
I don’t think we have to worry about interest, with the Federal Reserve buying up all the debt. (They are admitting buying 85 billion a month, but are probably buying twice that.) But everything comes with a price, and we will pay for this with the collapse of the US dollar.
Don’t worry, after all that stimulus spending things are going according to plan –
http://www.cnbc.com/id/100419252