Here are a couple of charts from Tim Wallace regarding interest on the national debt. The first chart shows the interest rate is falling as debt skyrockets.
Interest Rates vs. National Debt
- How long can the trend last?
- How low will the rate go?
I do not know the answers to those questions, nor does anyone else. However, a rise in interest rates would cause a shocking increase in interest on the national debt.
Interest on National Debt at Current Rate vs. Historical Average
Should interest rates rise to the long-term average, interest on the national debt would more than double from the 2011 figure of $454 billion dollars.
Here is a chart from the National Debt Clock site.
The site notes “Maturity of U.S. debt ranges from less than a year to over 20 years, with the average maturity about 3 years. More than half of the debt, however, is short term, maturing in less than a year.”
That is an interesting assertion short-term debt is at .09%, 10-year notes yield 1.67%, and the 30-year bond yields a mere 2.79%.
However, interest is on outstanding securities. A bond with a 6% yield maintains that yield until maturity. The average yield in Wallace’s charts paid comes from Treasury Direct.
Currency Crisis Coming
If you get the idea a crisis of some sort is coming, fueled by out-of-control deficit spending as well as the Fed’s ridiculous “Operation Twist Policy“, then you get the right idea.
The Fed ought to be selling long-term bonds at these rates, locking in financing at attractive rates, not buying those bonds hoping to drive yields still lower.
Of course, that latter statement assumes there should be a Fed or deficit spending in the first place, neither of which I believe.
Mike “Mish” Shedlock
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