Fed Chair Powell Joins the Inflation Conversation

10% would eventually lead to $3 trillion of debt payment every year. The current total budget is 6 trillion.

Currently interest expense is approaching $1 trillion which means more than 50% of the deficit is interest expense. A 10% interest rate would lead to a debt spiral

 

Yep, maybe that will also lead to reduced deficit spending and a rational budget spending proposal instead of a continued resolution... to bankrupt our nation.

Maybe we stop funding foreign wars while we're at it?

 

I dont think it works quite like that mathematically. 1/3 of the debt is held by other agencies like social security and some of the debt is longer term bonds vs 1 year Tbills so I'd guess its really more like half that. Current borrowing rate is 3%.

 

It would force Tax increases and spending cuts. Just what the Dr. ordered. Congress will not do it unless forced.

 

Yes I was simplifying.

I’m not sure it’s a 1/3 that is intra agency debt, but at least 20% intergovernmental, the rest is held by the Fed

The debt has many different maturities so long maturities are locked in for many years, but the debt isn’t going away and if rates stay higher eventually that is going to lead to locking in long term treasuries at higher rates.

Japan has been able to carry debt well over 200% of GDP but its interest rates have been near zero for decades.

Frankly I don’t know what the result is if we just keep paying higher and higher amounts of interest….to ourselves.