MAR 14, 2018
That interest on public debt hit an all-time February high is only surprising when you remember that interest rates are still damned near zero.
It’s not complicated, and don’t let anyone convince you it is: you can’t cut taxes and spend money you don’t have forever. Most frightening is the fact that the federal government will literally exhaust every single option is has before accepting this sober truth. Which will, undoubtedly, be forced on it eventually.
Given its sheer size, if the interest rate on that debt were to rise by even 1%, the annual federal deficit rises by $200 billion. A 2% increase in interest rate levels would up the federal deficit by $400 billion, and if rates were 5% higher, the annual federal deficit rises by a full $1 trillion per year.
Years of near-zero interest rates… allowed governments and households to borrow money for almost nothing. But that’s changing… [and] this is where things get scary…
Since the Federal Reserve began raising interest rates in Q4 2015, interest payments on the United States national debt have soared 38%.
Let that soak in… A 1.25% rise in short-term interest rates has corresponded with a 38% increase in the amount of interest paid for the United States national debt.