The National Debt Calamity

25 May
US Debt

The National Debt Calamity

The United States will spend over $300 billion on interest expense this fiscal year.  And that is with record low interest rates.

That represents nine percent of all federal tax revenue.  It is about $2,400 per household.

Those are just a few of the troubling details from a new report from the Committee for a Responsible Federal Budget.

Here are more:

  • Interest rates are climbing.  In early March 2020 and again in August 2020, the ten-year US Treasury was 0.5 percent.  Now it has bounced higher, to about 1.6 percent.
  • Thanks to the pandemic lows in rates, interest on the national debt will drop from $375 billion in Fiscal Year (FY) 2019 to roughly $300 billion this year.  
  • While the passing  interest rate drop provided a brief respite to the debt service load, the US added nearly $7 trillion of new debt.
  • If interest rates rise as the Congressional Budget Office projects, the cost of debt service will more than double by 2029.

We think interest rates are almost certain to rise much fast than CBO and CRFB projections, especially with inflation running hot.  In the first quarter of this year consumer prices were climbing at a 7.5 percent annual rate.  It stands to reason that if the dollar is losing value at such rates, lenders – buyers of US Treasury debt – will demand much higher interest rates as an inflation premium.  

As former Reagan budget director David Stockman remarks, “from the year 2000 to 2020 alone, interest expense rose by only 41 percent, even as the publicly held debt soared by 535 percent.”

The CRFB report acknowledges that possibility rates will climb faster than projections with this statement:

“The interest rate on ten-year Treasury bonds is already more than half a percentage point higher than projected. If all rates end up being 50 basis points above projections, interest costs would increase by $1.7 trillion. Interest spending would increase by $3.6 trillion if rates were one percentage point higher than projected [emphasis added].

What has this to do with gold and silver?  The Fed has purchased around half of the US debt issued in about the last year.  Where did it get the money to do that?  It printed it!

Clearly, it will have to purchase even more debt as interest rates rise, a prospect made certain by rising inflation.  That means more printing, which means still higher rates, which means more debt, which means…

The Fed is in a box of the Fed’s own making and the best way to protect yourself from the consequences is with gold and silver, the enduring money of the ages.  Speak with a Republic Monetary Exchange gold and silver specialist today to learn more.