US Debt Interest May Take Half Of Income Taxes Within A Few Years

[Economy 52,837]

https://www.google.ca/amp/s/www.cnbc.com/amp/2018/03/05/rising-interest-rates-will-be-devastating-to-the-us-economy-for-one-big-reason.html

 

Blame Trump!

 

Not only has the new President put in policies that accumulate debt at a faster pace than before, but his inflationairy inducing policies will also force bond yields (interest rates) higher

 

At the current projected rate of debt accomulation, if interest rates rise back up to their 30 year average (10 year bonds are at 2.9%, the 30 year average is close to 5%)... 

 

US debt charges would increase to over $800 Billion or about half of US income taxes by the time all bonds matured and thus had to be refinanced at the new market rates

[Retron 2,605]

[JustinTrudeau 2,419]

Well well well

This 'businessman' seems to be helping the country save money and be great again  

[DutchHooker 8,600]

I'm staying out of this before I get dragged again.. 

[Economy 52,837]

5 minutes ago, DutchHooker said:

I'm staying out of this before I get dragged again.. 

Now I'm curious to know ur opinion lol

 

[LePetitGAGABLover 21,234]

Tragic results from a tragic leadership. 

[FixtheSSL 9]

inb4 monsters blaming trump for inventing the debt

 

 

 

[Petie Estie 5,704]

i could prob google it but....who we paying this interest to....at this level debt seems silly. i guess other countries. But then it' slike.....when does that loan get put into the USA economy? lol. the concept of debt on an international scale makes no sense to me. 

[Mikolaj 11,640]

@DutchHooker actually it would be cool to know your opinion on this one

On topic, that's terrible isn't it?  the government is spending like it's recession. The debt is sustainable as long as people believe in US ability to pay it off and buy the bonds... but that's quite a catchy fact to throw around - half of income tax will be spent on the interest alone, not mentioning paying the debt off. Once this goes viral (or an even more disastrous prediction), it's not gonna be fun if one year there will be no borrowing anymore because no one will lend the money.

[Economy 52,837]

1 hour ago, SEANGT said:

i could prob google it but....who we paying this interest to....at this level debt seems silly. i guess other countries. But then it' slike.....when does that loan get put into the USA economy? lol. the concept of debt on an international scale makes no sense to me. 

Lol That would not work. Most Countries have debt and few lend so how would Countries ever borrow enough from other Countries?

 

I'll explain how it works

 

Governments sell something called bonds (Corporations sometimes sell them too). And that bond has an age of maturity. On that date whoever sold it must pay it back

 

Generally speaking Governments sell 1 year, 2 year, 5 year and 10 year bonds but as high as 30 year or longer exist. The Government sells new ones on a daily basis to pay off the bonds that are due

 

Literally ANYONE can invest in them. Individuals like you and me, Investment funds, Pension Funds and in some cases yes Countries may also choose to invest in them if they have a savings fund (Like Norway, China, Saudi Arabia etc)

 

If you work and make deductions for retirement, good chance your retirement fund has at least some of its assets in bonds. Most ppl have lent the Government without even realizing it!

 

So to answer your question, Government debt is actually owed by many different sources, it's a big mix of lenders.

 

Bonds can also be sold early and traded that's called the bond market and their interest rates and yields fluctuate, bonds even have prices too

 

Right now the US 10 year bonds are just under 2.9% but that's low by historical standards. It would be hard for the US to sustain payments if rates went up to 4% or 5%

 

Other Nations have this issue too. The world has gotten hooked on cheap credit of the last decade!

[Economy 52,837]

1 hour ago, ExMachina said:

@DutchHooker actually it would be cool to know your opinion on this one

On topic, that's terrible isn't it?  the government is spending like it's recession. The debt is sustainable as long as people believe in US ability to pay it off and buy the bonds... but that's quite a catchy fact to throw around - half of income tax will be spent on the interest alone, not mentioning paying the debt off. Once this goes viral (or an even more disastrous prediction), it's not gonna be fun if one year there will be no borrowing anymore because no one will lend the money.

Or they could still lend the US money but at much higher rates... This would affect Corporate bonds as well and in turn surge the cost of credit for everything not to mention slow business investment

 

Japan somehow has a debt to GDP ratio of 230% (highest in the world) and hasn't had a meltdown and their bond yields are like 0.8%

 

Nevertheless Japan has some unique circumstances that make a debt load that high possible to sustain. Most Countries (including the US) could never

[Mikolaj 11,640]

15 minutes ago, Economy said:

Or they could still lend the US money but at much higher rates... This would affect Corporate bonds as well and in turn surge the cost of credit for everything not to mention slow business investment

 

Japan somehow has a debt to GDP ratio of 230% (highest in the world) and hasn't had a meltdown and their bond yields are like 0.8%

 

Nevertheless Japan has some unique circumstances that make a debt load that high possible to sustain. Most Countries (including the US) could never

I have an internal conflict whether I should research to answer here or study for Economics exam tomorrow 

Are those debts really sustainable in the long term? Be it Japan or USA - let's say that USA borrows money at higher and higher rates which only accelerates the accumulation of debt. It looks like a downward spiral to me. You have to pay it back eventually.  At one point it's bound to go to hell and this news makes it look like it's gonna be sooner rather than later.

Germany made a surplus recently so it's not like impossible, just requires wise decisions rather than (insert any Trump's fiscal decision).

[Economy 52,837]

25 minutes ago, ExMachina said:

I have an internal conflict whether I should research to answer here or study for Economics exam tomorrow 

Are those debts really sustainable in the long term? Be it Japan or USA - let's say that USA borrows money at higher and higher rates which only accelerates the accumulation of debt. It looks like a downward spiral to me. You have to pay it back eventually.  At one point it's bound to go to hell and this news makes it look like it's gonna be sooner rather than later.

Germany made a surplus recently so it's not like impossible, just requires wise decisions rather than (insert any Trump's fiscal decision).

Mathematically u cannot surge your debt indefinitely. Eventually ud reach a point where u will simply need to borrow more than investors have to lend to you (even with higher rates encouraging lending)

 

If it was owed money like a mortgage to one institution who was happy to just let the debt compound on itself to make you pay interest forever that's one thing

 

But because Governments borrow thru bonds, and these bonds all have due dates on them and they have to borrow more to pay it off, fast debt accumulation forever wouldn't work

 

Most economists consider long term annual deficits of 3% of GDP or lower sustainable tho as the economy would grow along with the debt making the size of debt relative to the economy stable (Debt to GDP Ratio)