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Bonds & Interest Rates

Keeping Rates Low Until 2014?

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Posted by Martin Armtrong - Armstrong Economics

on Thursday, 26 January 2012 16:27

Screen shot 2012-01-26 at 3.31.41 PM

While the first reaction is for gold to rally and the pundits to come screaming out of the weeks yealling it's inflationary, the harsh reality of this statement is....



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Bonds & Interest Rates

DANGER AHEAD FOR U.S. GOVT: Unable To Service Debt As Interest Rates Surge

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Posted by Steve St. Angelo - SRSRocco Reportt

on Monday, 29 November 1999 17:00

The U.S. Government is in serious trouble when interest rates rise.  As interest rates rise, so will the amount of money the U.S. Government will have to pay out to service its rapidly rising debt.  Unfortunately, interest rates don’t have to increase all that much for the government’s interest expense to double.

According to the TreasuryDirect.gov website, which came back online after being down for nearly a month, reported that the average interest rate paid on U.S. Treasury Securities increased from 2.2% in November 2016 to 2.3% in December 2017.  While this does not seem like a significant change, every increase of 0.1% in the average interest rate, the U.S. Government has to pay an additional $20.5 billion in interest expense (based on the $20.5 trillion in total U.S. debt).

Already, the U.S. Government is off to a BANG as it’s interest expense paid for the first three months of the year increased to $147 billion compared to $139 billion in the same period last year:

US-Oct-DEC-2015-2017-Interest-Expense

This chart was taken directly from the TreasuryDirect.gov site, with my added annotations.  As we can see, the U.S. Government paid $126.5 billion to service their debt Oct-Dec 2015.  We must remember, the U.S. Government Fiscal period starts in October.  So, in just two years, the interest expense the U.S. Government paid for Oct-Dec increased more than $20 billion.  Now, what is interesting is that the average interest rate in Dec 2015 was 2.33%, but in Dec 2017 it was only 2.31%.  Thus, it was actually lower, even though the interest expense increased by $20 billion.

The reason for the $20 billion increase in the interest expense during Oct-Dec 2017 versus Oct-Dec 2015 was due to a more than $2 trillion increase in U.S. debt over that two-year period.  So, the U.S. Government will have a serious problem as interest rates really start to rise… and that doesn’t even include the continued increase in total U.S. debt.

This next chart shows the increase in U.S. debt, while the average interest rate fell from an average 6.6% in 2000 to a low of 2.2% in 2016:



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