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Why US Interest Rates Can Never Rise (In 1 Chilling CBO Chart)
Submitted by David Howden via Mises Canada,
It’s not just homeowners who have to worry about rising interest rates, the Federal government might soon get a taste of its own medicine.
With the Fed doing all it can to stimulate inflation, increases to interest rates are taking a front seat amongst borrowers’ fears. From the admittedly partisan Republican Senate Committee on the Budget comes this report outlining how federal interest outlays will dovetail with other expenses in the future.
To summarize:
The U.S. gross federal debt currently stands at $17.548 trillion, and net interest payments to our creditors are the fastest-growing item in the budget. In 2014, the Congressional Budget Office projects that the nation will spend $233 billion on interest payments. By the end of the budget window in 2024, however, CBO forecasts that interest payments will nearly quadruple to an astonishing $880 billion. Every dollar spent paying our creditors is a dollar wasted—money for which we get nothing in return. Interest payments threaten to crowd out every other budget item.
To put the $880 billion, single-year interest payment in perspective, here is what we currently spend on other budget items:
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Federal Courts – $7.4 billion
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Department of Education – $56.7 billion
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Secret Service – $1.8 billion
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Food Inspection – $2.3 billion
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Census Bureau – $1.0 billion
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Border Patrol – $12.3 billion
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National Parks – $3.0 billion
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NASA – $17.6 billion
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Centers for Disease Control – $7.1 billion
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Federal Prison System – $6.9 billion
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Workplace Safety Inspections – $0.9 billion
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Immigration and Customs Enforcement – $5.6 billion
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FDA – $2.6 billion
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Federal Highway Budget – $40.4 billion
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Coast Guard – $10.0 billion
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Small Business Loans – $0.9 billion
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Veterans’ Health Care – $55.3 billion
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FBI – $8.3 billion
Every debt incurred today will be paid off in the future. The graph above may be shocking to some, but it’s only a very small part of the picture. This is just interest on debt, and doesn’t even include the costs of repaying the principal. Of course, the principal never really gets repaid as the government just borrows afresh to paper over its old debts, but the interest must be covered lest savers stop lending money to the government.
Nor is this only a concern for the future. Last year the government spent more on interest payments (c. $700 bn.) than it did on Medicare (a little under $600 bn.).
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Merge the census bureau into the IRS? The Census is a Consitutional responsibility. The IRS is not.
"The U.S. gross federal debt currently stands at $17.548 trillion, and net interest payments to our creditors are the fastest-growing item in the budget."
Who is "our?" It's not mine, and I didn't co-sign for it.
An American, not US subject.
dupe
all of this problem is cured with a 20-30% shot of inflation. maybe that is the point of the abeconomic world.
I firmly beleive rates will not rise because the Fed MUST monetize trillions of debt/deficit just as they did post-WWII. Plus, we have a gubmint packed with Hawks which pushes moar spending and inflation (with dollar devaluation) higher.
sounds like the bottom to me...
Remember that TIME article?
CNBS STEVE DOOSHMAN said GDP was higher than 5% today.....
The dooshman is never wrong
If interest rates are at zero, why would you have to make any interest payments? There I just saved you $880 billion per year. My fee is .0000006 percent. Cash only. Wait, I mean PM only.
But look at how long Japan has lasted.
Get rid of Fed and all the investment banks then the world would have some hopes, otherwise it's doomed.
By 2024 you say? Libs are very blissful in their ignorance - not having to think about tomorrow. Just get the lie out today and no one will be paying attention. Eg. Obama elected to 2 terms.
That might be the most retarded thing anybody has said in the history of humanity.
What you get when you pay down contracted debt, is the ability to borrow at the same (or better) terms in the future. You get the ability to roll over your short term debt at rates that don't reflect your genuine economic prospects. You get the trust of your counterparties.
I would LOVE it if the US stopped paying its debts: it would be an international pariah in about 4 news cycles, and would be five different countries within 6 months.
Sure, it would be messy, as the US parasite class (the politicians and their camp-followers) flailed around trying to "war" their way out of obligations - but try doing that for more than a week when nobody will take your paper as settlement for fuel, food, and other logistical support (transit rights, use of airspace etc).
In the 1950's it would be only one news cycle. Sigh...
"Every dollar spent paying our creditors is a dollar wasted—money for which we get nothing in return. Interest payments threaten to crowd out every other budget item."
Oh yes this stupid bastard to lend us money and expect to get it back. How can they dare? Let's stop paying and start a new round for bigger stealing. That'll do this time
Well DUH. LT debt interest rates have consistantly run between 6 and 8 percent for the government, meaning the 233 billion interest rate is a super low 1.3-1.4%. Rates return to the LT average and the interest payments soar to nearly a trillion per year, providing the Debt doesn't increase (It will, by around 1/2 trillion per year.) Since Republicans are Math Defecient, an ever increaseing Federal Debt by 2024 would ballon to 22 Trillion dollars at 500 billion per year. So returning to six percent would actually mean an interest payment of 1.32 Trillion dollars out of an expected 4 Trillion dollar budget (that's assuming virtually no increase in spending for the next 8 years.)
We are screwed, it's just determining how big the screw is going to be.
This is just interest on debt, and doesn’t even include the costs of repaying the principal.
'Paying off the principle is an impossibility with our fiat system. Just one facet in the evil of fiat banking.
Maybe this should be the chart the CBO publishes as a summary chart right on the front page of their own report.
This is no surprise to me. One of Obama's campaign advisers, Peter Drier, gave a presentation at the Socialist Scholars Conference in which he stated that it is their intention to bring "fiscal collapse" (his term, not mine) to the US government in order to foment a Bolshevik-style Marxist revolution in America. So overloading the US government with debt is part of that strategy.
I also met a man a few years ago whose grandfather is the head of the global central banking cartel. He told me also that it was their plan to destroy the US Constitution by 1) sinking the US economy, by 2) destroying the the US Dollar, by 3) creating so much debt that it throws the US government into a crisis. That's their PLAN! I've heard that straight from the horse's mouth!
Citation for our contention that Dreier was one of Obama's campaign advisors, please? The "fact" that Obama went to the Socialist Scholars Conference in 1983 (based on conjecture, btw), when he was a senior at Occidental college, is hardly proof that he is formenting a Marxist revolution.
I prefer to look at what he has done since he became president, and there is nothing "socialist" to find. He can hardly be blamed for the Global Financial Crisis, which happened under Bush's watch. Only for propping up the banksters afterwards. If thats a socialist plot, it sure is playing into the hands of the 1%.
Get a new horse. Your sources are nothing more than conspiracy theorists who reach very hard to find dots to connect but end up making all sorts of illogical leaps to do so. Propagandists use these kind of "stories" to influence susceptible people into believing lies. Your kind of thinking is what gave McCarthyism its boost back in the 1950s and serves well to stifle any dissent and honest dialog. Ideas are hardly the enemy and no matter how hard the US works to meddle in any nationalization movements abroad, they can't stop people from thinking.
Obama is just another member of the duopoly who stands for status quo for corporate benefactors.
p.s. the bold face doesn't make your comment look any more important.
Bring it on, I am ready for open-season no-bag-limit on socialist parasites.
"Game over, man. Game over, what the fuck are we supposed to do now, huh, what are we gonna do?"
I love reading the comments sections whenever the discussion turns to interest rates and debt.
I have to go look at 10-year bond rates, with my friend Janet.
I see they're right around 2.5%, which means, as you all know, there's still more room for the never-ending bond rally to continue. Come on now, sure, it's a bit elevated, but last December it briefly touched 3%.
What happened then? Hmmm... it came right back down to a more "reasonable" level.
With the Fed withdrawing all their liquidity (QE) by October (next month), everybody thinks that the 10-year interest rate should rise, along with all other rates, I suppose.
Let's guess who is really in control of those interest rates, who holds most of the Treasury issuance in the 10-year? The Fed. And they'll make damn sure that rates remain "reasonable" and the only "sane" place to invest is in stocks. Even at these low rates, they're making money hand over fist, inflation or no inflation, doesn't matter.
Just answer this honestly: If you could borrow any amount of money you liked at 2.5% over 10 years, how much would you want and how would you use the funds?
There's lots of ways to use nearly free money in productive ways, and I'm not talking about investing in stocks.
Or, you could be like our federal government and just blow it on worthless shit that keeps people happy.
The Fed has no 'real' control over interest rates, only what they can muster will rhetoric. Sorry but the 10 YR is about to rocket into the stratosphere.. I know am repeating myself but:
http://www.globaldeflationnews.com/10-yr-treasury-index-yieldelliott-wav...
I find it humourous that more money is spent on the Census Bureau than money loaned out to Small businesses who may actually provide some value at some point
"Every dollar spent paying our creditors is a dollar wasted—money for which we get nothing in return. Interest payments threaten to crowd out every other budget item."
True statement, and the essence of deflation. As debtors scramble to pay down debt, they spend less in the general economy forcing business to reduce wages and lower prices. But lower wages only causes consumers to spend even less and to try even harder to pay off their growing debt problem. The spiral continues feeding on itself until most of the debt bubble has been destroyed either by default or pay down or forgiveness.
As the bubble bursts:
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
Yield on the 10 YR will rise dramatically
http://www.globaldeflationnews.com/10-yr-treasury-index-yieldelliott-wav...
and the dollar will skyrocket.
http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-historic...
These are hard things to comprehend without understanding the nature of deflation. Few people today have any comprehension of what a deflationary depression looks like. After all, the last one happened 90 years ago. Almost everyone alive today who lived through it was a child at the time.
I think it obvious now that the USA and EU will follow in the steps of Japan, but without the hyper-nationalist reinvestment of all surplus savings into national bonds.
So what will happen is a long, multi-decadal, slide down, which in 20 years will result in a 0.5% y/o/y GDP rate being considered ''good". This will work poorly in the EU nations with dropping populations, and catastrophically in all immigrant nations like the UK and USA.
TPTB are just trying to hold on, making it up as they go along. Since restructure, default, elimination of the bad banks and bad investments are impossible as everyone in charge wants to stay in charge, a long grind down is in the cards.
IOW, this is as good as it gets and it is only going to get worse with each passing year.
Unless you are in the top 1% and able to stay there.
If I were young I would get a degree, get rid of all debt by any means legal or not and leave for other nations.
The esteem that the EU UK and USA are held in is dropping in politics and economics, but a degree from a university in one of those nations will have high social value for many decades to come. Any real school will do, Harvard not required. Just get rid of that debt.
Mobility is the key.
Interesting action plan, but which country would you emigrate to ???
I went to more than 120 countries searching for a better home and was very disappointed - the USA sucks and is racing to the toilet but most countries are even worse !
The author is spot on as to the fact that interest rates will NEVER rise in America because the two entities that have benefited most are the federal government & the banks. The majority of the masses don't have two nickels to rub together and are well on the way to becoming future deadbeats, making it even easier to keep interest rates low since savers are a shrinking minority.
The US government debt is nothing more than a lifelong & perpetually increasing INTEREST-ONLY loan where the principal will NEVER be REPAID. The last time that US debt actually decreased from one fiscal year to the next was 1957 and that was a mere $2 billion dollars. Cumulatively, since Reagan entered office in 1981, the interest on the national debt easily exceeds $10 TRILLION.
The numbers posted concerning the INTEREST on the NATIONAL DEBT are just plain INACCURATE because the actual figure is nearly double that amount. The total INTEREST PAID on the NATIONAL DEBT for FY 2014 was $415,688,781,248.40 and thus far for FY 2015 it is $411,217,855,816.94 as of 05 SEP 14 with just about 25 days left in the fiscal year accounting period.
The latest, true FIGURES can be found at Office of the Public Debt website link:
Interest Expense on the Debt Outstanding http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
The author has relied on figures from at least one of two of the most erroneous sources concerning the federal debt, which is either the Office of Management & Budget(OMB) documents AND/OR the Congressional Budget Office(CBO) budget documents. The reason for this is that these sources provide only BUDGET documents which are layered with government inaccuracies, half-truths, and even lies. The sole purpose of government BUDGET documents is to sell EVERYONE on the notion of spending MORE MONEY. Part of that process is minimizing the truth on the national debt to the point that most congressman from both sides enjoy repeating it to no end as if it were gospel.
The BUDGET documents fabricated by BOTH OMB & the (bipartisan[JOKE]) CBO DELIBERATELY ELIMINATE the portion of the INTEREST PAID to the Social Security & Other Trust Funds each year as interest on the roughly $5 trillion dollars loaned out via Treasury purchases from the Trust Funds. The government argues that the Trust Funds are a part of the government, otherwise known as INTRAGOVERNMENTAL HOLDINGS. Thus, this interest money PAID from the general fund each year to these trust funds does not count as interest on the debt.
However, the government will FREELY acknowledge that the total US DEBT is $17,753,539,449,528.81 (as of 09 SEP 14) of which $4,987,665,290,983.83 is INTRAGOVERNMENTAL HOLDINGS & $12,765,874,158,544.98 is PUBLIC DEBT. They just cannot bring themselves to INCLUDE that extra ~$200 billion a year being paid out as interest to the Trust Funds for money long since stolen & squandered from the past.
SOURCE: The Debt to the Penny and Who Holds It http://www.treasurydirect.gov/govt/reports/pd/pd_debttothepenny.htm