Interest rates are being kept artificially low by the Fed buying government securities to the tune of 85 billion dollars.
We know they are among the lowest interest rates in history.
We also know that the cost of our interest payment is about 350 billion a year. The interest bubble will soon burst, though, and if that even doubles to about 4%, that makes our interest payment more than the cost of the entire Dept of Defense including the war in Afghanistan.
If it goes to a normal 6-7%, then it’s as costly as the social security/Medicare program.
In other words, we’re screwed.
The Fed is riding this big interest bubble now, and they MUST have a lousy economy to keep inflation in check. If inflation increases, then the interest bubble is going to burst.
Yep, they’re playing with fire. We’re the ones who will get burned. It would be nice to believe that Bernanke and Co. were well-meaning, but they’re not neutral. They’ve focused on rescuing not the financial system, but their banker friends. It’s a mess.