Chubby chasers liberty missouri
During the fantastic growth of the national debt interest rates were very low, a favorable position for a debtor to be in; however, the interest rates are likely to increase with the new Fed policy to increase the benchmark rates.
This means debt will become more expensive to service, and likely return closer to the historical average rate of about 5%.
If we assume this will double over the next 3 years when interest rates go up, that is a debt cost of 2*2= 4 Billion.
This is still pretty cheap but will be added directly to the deficit (and thus converted to new debt) as our revenue is unlikely to increase any more than the economy does.
My personal theory on how and why this happens is as follows: There is a ‘crowding out’ effect by taking investments away from high risk/reward private debts, but also because more and more money is spent servicing debt rather than being spent on goods and services.
Why risk your cash when you can get a guaranteed return on investment?
First, we must cover the current liabilities, debts, and revenue streams of the Federal government.
For this thought experiment, let us assume that the Fed is targeting 3% for inflation and that they get it in 3 years.In 2063 when John dies, the debt to GDP ratio would be equal to 2.7 and real growth would be -1%.Japan aside, it is not clear anyone would be willing to continue to lend to a country with such anemic growth and high-debt.On top of all this bad news in terms of debt, growth and interest rates we will have acceleration in the costs of the major entitlement programs as the populace continues to age and even grow infirm before their years (some of this can be attributed to the increase in the average American’s waistline).Again, there is no political will to reform these programs.