Revolving Credit and Student Loans
Revolving Credit vs. Personal Savings Rate
Revolving Credit vs. Real Income
Federal Debt vs. 10-Year Treasury Rate
U.S. government debt is going parabolic. Ever-increasing debt is manageable if interest rates fall concurrently so the interest on that debt doesn’t change. And, as can be seen in the chart below, that’s what happened between 1980 and 2021. The Fed pushed down interest rates, which minimized interest costs, which lulled a gullible investment community and political class into the belief that this process could continue forever. But, of course, it can’t last forever. Soaring debt required ever greater currency creation which eventually caused the cost of living to jump by 10% in 2022, leading regular people to demand that it stop. So the Fed now has to raise interest rates to counter inflation. You can see this happening on the far right of the chart below.
U.S. Government Interest Expense
As the US borrows more money and its existing debts roll over at higher rates, the cost of that debt is soaring. In 2023 the government’s annual interest bill will break $1 trillion. Combine that with the soaring cost of Medicare and Social Security as millions of Baby Boomers retire, and Washington is looking at $2 trillion a year just in just interest and entitlements, which it will have to borrow to fund, which will send interest costs even higher, which will require more borrowing, and so on, until it all comes crashing down.
As you can see….the federal government spends as much on interest payments as they do on national defense!