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Us Debt, Ir's And Sustainability


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#1 interestrateripoff

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Posted 17 March 2009 - 10:10 AM

http://www.brillig.com/debt_clock/

Not sure how accurate this figure is but it highlights the problem of servicing the debt.

The Outstanding Public Debt as of 17 Mar 2009 at 09:56:27 AM GMT is: $10,996,741,662,061.05

Outstanding current US debt is the above, assuming this clock is correct.

Now at 5% IR that means to service the debt the US needs:
$549,837,083,103.05 per year

Even being charged 1% the US needs to generate $109,967,416,620.61

Just think how many schools, medicare etc.... that money would pay for.

Even with rates at 0.25% the US needs $27,491,854,155.15 just to service it's debt.

This of course assumes that it's paying the same rate on all of it's debt.

To further complicate the matter if the debt grows at a "reasonable" 2% per year that adds only a mere $219,934,833,241.22 to the future.

If your brave keep doing that for 10 years and I bet the compounding effect adds about 20% onto the debt figure.

Sustainable in the long term? I think not.

Our economic exponential system is close to collapse the figures have gone beyond astronomical, remember this is one country.

IR's are inflationary to service this sort of debt requires inflation, without it the system implodes.

Again you won't ever see anyone talking about this in the media.

Edited by interestrateripoff, 17 March 2009 - 08:03 PM.

Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default

 

"The trouble with the world was that prices were so low that only the rich people could buy and the aim of the Conference was to raise them to a point where it would again be possible for poor people to buy something."

"Northern unemployment is an acceptable price to pay for curbing southern inflation" Eddie George former Governor of the Bank of England

New digest on the credit crisis and economy Part2 Part 3

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#2 kilroy

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Posted 17 March 2009 - 10:13 AM

http://www.brillig.com/debt_clock/

Not sure how accurate this figure is but it highlights the problem of servicing the debt.

The Outstanding Public Debt as of 17 Mar 2009 at 09:56:27 AM GMT is: $10,996,741,662,061.05

Outstanding current US debt is the above, assuming this clock is correct.

Now at 5% IR that means to service the debt the US needs:
$549,837,083,103.05 per year

Even being charged 1% the US needs to generate $109,967,416,620.61

Just think how many schools, medicare etc.... that money would pay for.

Even with rates at 0.25% the US needs $27,491,854,155.15 just to service it's debt.

This of course assumes that it's paying the same rate on all of it's debt.

To further complicate the matter if the debt grows at a "reasonable" 2% per year that adds only a mere $219,934,833,241.22 to the further.

If your brave keep doing that for 10 years and I bet the compounding effect adds about 20% onto the debt figure.

Sustainable in the long term? I think not.

Our economic exponential system is close to collapse the figures have gone beyond astronomical, remember this is one country.

IR's are inflationary to service this sort of debt requires inflation, without it the system implodes.

Again you won't ever see anyone talking about this in the media.

so why, pray tell, would this cause interest rates to not go above 5%?

#3 Sinking Feeling

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Posted 17 March 2009 - 10:14 AM

Few economists see, to have managed to figure out the bleeding obvious - at least publicly - that this is the real reason for QE!
People take part in the ups and downs of popular feeling not only as entrepreneurs but also as savers and consumers. In the boom they confidently put their savings in the illiquid form of securities and mortgages while in the depression they hold them mistrustfully on demand deposit at the banks. It is of special significance that the bankers themselves are also subject to the psychological ebb and flow. So it is that in the boom, infected by the general ardent optimism, they loosen the reins of their credit policy, sift less strictly the demands for credit, look less fastidiously at collateral, overestimate the productivity of the credits they grant and are satisfied with less liquidity. In the depression the memory of the sins of the boom, and the " frozen credits " with which they atone for these sins, cause the banks to fix the most extreme requirements for their liquidity and to subordinate to this all other considerations.

Wilhelm Ropke 1931

In the summer of 1931 a Labour Government suddenly sagged at its knees and fell dead. High Finance had killed it as High Finance will kill the next Labour Government, and the next again............

Excerpt from The Financiers and the Nation, Thomas Johnston, 1934


#4 pilchardthecat

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Posted 17 March 2009 - 10:17 AM

free money for everyone, wooooooooo
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My new blog

#5 interestrateripoff

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Posted 17 March 2009 - 10:19 AM

so why, pray tell, would this cause interest rates to not go above 5%?


To pay for it you need inflation, how ever with inflation you need higher interest rates in current economic thinking, this causes the need for higher inflation to meet the debt repayments, which in turn generates the need for larger inflation meaning higher interest rates.

Catch 22 my friend.

This is the economic apocalypse.

Debt is a killer, there is no way the economy can be productive enough to pay the debt, hence you'll end up with debt destruction which will either cause deflation or hyperinflation both of which will cause demand destruction.

I can't think of any other outcome. Even stagnation wouldn't help.

We have hit the mathematical brick wall.

Exponential growth is impossible.

Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default

 

"The trouble with the world was that prices were so low that only the rich people could buy and the aim of the Conference was to raise them to a point where it would again be possible for poor people to buy something."

"Northern unemployment is an acceptable price to pay for curbing southern inflation" Eddie George former Governor of the Bank of England

New digest on the credit crisis and economy Part2 Part 3

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#6 joconme

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Posted 17 March 2009 - 10:29 AM

The Outstanding Public Debt as of 17 Mar 2009 at 09:56:27 AM GMT is: $10,996,741,662,061.05


I don't mind admitting that I couldn't have read this figure 3 months ago, now I can absorb it as quickly as I could £1.50 - that worries me a lot.

#7 kilroy

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Posted 17 March 2009 - 10:37 AM

To pay for it you need inflation, how ever with inflation you need higher interest rates in current economic thinking, this causes the need for higher inflation to meet the debt repayments, which in turn generates the need for larger inflation meaning higher interest rates.

Catch 22 my friend.

This is the economic apocalypse.

Debt is a killer, there is no way the economy can be productive enough to pay the debt, hence you'll end up with debt destruction which will either cause deflation or hyperinflation both of which will cause demand destruction.

I can't think of any other outcome. Even stagnation wouldn't help.

We have hit the mathematical brick wall.

Exponential growth is impossible.

china will tell us to p!ss off long before this. Interest rates can go up without inflation, you need to look through to basic supply and demand for gov debt. This is what happened in the bond crash in the thirties and caused the depression, not the stock market crash of 1929.

#8 interestrateripoff

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Posted 17 March 2009 - 10:47 AM

china will tell us to p!ss off long before this. Interest rates can go up without inflation, you need to look through to basic supply and demand for gov debt. This is what happened in the bond crash in the thirties and caused the depression, not the stock market crash of 1929.


What I'm arguing is that there will be no way this money can be repaid back.

Even at 1% the US needs $110bn a year just to service the debt.

Lets say interest rates hit 10% that would be $1.1tr in taxes collected just to service US debt.

Do you think that is possible? Obama has already proposed a budget of $3.6tr.

http://news.yahoo.co...ap/obama_budget

Assuming IR's hit 10% that would mean 1/3 of that budget is needed just to service the debt and that's not paying any of it off? Also consider this was Obama opening shot the budget will probably get reduced to $2tr, now that's over 50% of your tax revenue just going on debt servicing and doing nothing productive in the economy.

Debt is going to constrict the economy for decades.

IR's are for me the ultimate stealth tax ensuring productive money gets sucked out of the economy.

Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default

 

"The trouble with the world was that prices were so low that only the rich people could buy and the aim of the Conference was to raise them to a point where it would again be possible for poor people to buy something."

"Northern unemployment is an acceptable price to pay for curbing southern inflation" Eddie George former Governor of the Bank of England

New digest on the credit crisis and economy Part2 Part 3

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#9 interestrateripoff

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Posted 17 March 2009 - 07:44 PM

2% growth

1
1.02
1.0404
1.061208
1.08243216
1.104080803
1.126162419
1.148685668
1.171659381
1.195092569
1.21899442
1.243374308
1.268241795
1.29360663
1.319478763
1.345868338
1.372785705
1.400241419
1.428246248
1.456811173
1.485947396
1.515666344
1.545979671
1.576899264
1.608437249
1.640605994
1.673418114
1.706886477
1.741024206
1.77584469
1.811361584
1.847588816
1.884540592
1.922231404
1.960676032
1.999889553
2.039887344

This takes 36 years.

Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default

 

"The trouble with the world was that prices were so low that only the rich people could buy and the aim of the Conference was to raise them to a point where it would again be possible for poor people to buy something."

"Northern unemployment is an acceptable price to pay for curbing southern inflation" Eddie George former Governor of the Bank of England

New digest on the credit crisis and economy Part2 Part 3

smaller.jpg


#10 16bit

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Posted 17 March 2009 - 07:50 PM

The Outstanding Public Debt as of 17 Mar 2009 at 09:56:27 AM GMT is: $10,996,741,662,061.05


Thanks for printing that nice number. Doesn't mean a damn thing however - it's not debt, just a number. Remember it.

#11 interestrateripoff

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Posted 17 March 2009 - 07:50 PM

2% population growth starting point 6bn over the same time frame.

6,000,000,000,000
6,120,000,000,000
6,242,400,000,000
6,367,248,000,000
6,494,592,960,000
6,624,484,819,200
6,756,974,515,584
6,892,114,005,896
7,029,956,286,014
7,170,555,411,734
7,313,966,519,969
7,460,245,850,368
7,609,450,767,375
7,761,639,782,723
7,916,872,578,377
8,075,210,029,945
8,236,714,230,544
8,401,448,515,155
8,569,477,485,458
8,740,867,035,167
8,915,684,375,870
9,093,998,063,388
9,275,878,024,655
9,461,395,585,148
9,650,623,496,851
9,843,635,966,788
10,040,508,686,124
10,241,318,859,847
10,446,145,237,044
10,655,068,141,784
10,868,169,504,620
11,085,532,894,713
11,307,243,552,607
11,533,388,423,659
11,764,056,192,132
11,999,337,315,975
12,239,324,062,294

Now start thinking in 1 year we add 120m to the population. Within 4 years we've added 500m people, all mouths to feed, more jobs needed and more economic growth. You probably need more growth than the 2%.

Increased food production etc....

You can start to understand why exponential growth becomes a mathematical impossibility we will run out of resources.

Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default

 

"The trouble with the world was that prices were so low that only the rich people could buy and the aim of the Conference was to raise them to a point where it would again be possible for poor people to buy something."

"Northern unemployment is an acceptable price to pay for curbing southern inflation" Eddie George former Governor of the Bank of England

New digest on the credit crisis and economy Part2 Part 3

smaller.jpg


#12 spivT

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Posted 17 March 2009 - 08:00 PM

Few economists see, to have managed to figure out the bleeding obvious - at least publicly - that this is the real reason for QE!


well yeah, QE is there to reduce the cost of borrowing, that includes the cost of gubbermunt borrowing.

#13 huw

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Posted 17 March 2009 - 08:10 PM

Surely existing bond interest will continue to be payable at the issue rate regardless of future rate changes?
"If the economic relationships between nations are not, by one means or another, brought fairly close to balance, then there is no set of financial arrangements that can rescue the world from the impoverishing results of chaos" -- Geoffrey Crowther

#14 gf3

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Posted 17 March 2009 - 09:08 PM

2% population growth starting point 6bn over the same time frame.

6,000,000,000,000
6,120,000,000,000
6,242,400,000,000
6,367,248,000,000
6,494,592,960,000
6,624,484,819,200
6,756,974,515,584
6,892,114,005,896
7,029,956,286,014
7,170,555,411,734
7,313,966,519,969
7,460,245,850,368
7,609,450,767,375
7,761,639,782,723
7,916,872,578,377
8,075,210,029,945
8,236,714,230,544
8,401,448,515,155
8,569,477,485,458
8,740,867,035,167
8,915,684,375,870
9,093,998,063,388
9,275,878,024,655
9,461,395,585,148
9,650,623,496,851
9,843,635,966,788
10,040,508,686,124
10,241,318,859,847
10,446,145,237,044
10,655,068,141,784
10,868,169,504,620
11,085,532,894,713
11,307,243,552,607
11,533,388,423,659
11,764,056,192,132
11,999,337,315,975
12,239,324,062,294

Now start thinking in 1 year we add 120m to the population. Within 4 years we've added 500m people, all mouths to feed, more jobs needed and more economic growth. You probably need more growth than the 2%.

Increased food production etc....

You can start to understand why exponential growth becomes a mathematical impossibility we will run out of resources.

Ever heard of the rule of 72? Simply divide 72 by the inflation rate and thatís how many years it takes for money to halve in value. Quite an accurate rule of thumb.

#15 interestrateripoff

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Posted 17 March 2009 - 09:14 PM

Ever heard of the rule of 72? Simply divide 72 by the inflation rate and thatís how many years it takes for money to halve in value. Quite an accurate rule of thumb.


Never heard that before.

Can you show some examples of that in effect?

Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default

 

"The trouble with the world was that prices were so low that only the rich people could buy and the aim of the Conference was to raise them to a point where it would again be possible for poor people to buy something."

"Northern unemployment is an acceptable price to pay for curbing southern inflation" Eddie George former Governor of the Bank of England

New digest on the credit crisis and economy Part2 Part 3

smaller.jpg





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