Damn It, Janet! Treasury Secretary Janet Yellen Suggests Much Lower For Much Longer (Make Rates Great Again or MRGA?)

Former Fed Chair Janet Yellen, notorious for leaving rates too low for too long (TLTL) and then suddely raising them after Donald Trump was elected President, wants rates lower again for much longer. Make rates great again (MRGA?).

On October 5, 2023, Treasury Secretary Janet Yellen made a very telling statement about the future course of interest rates.

YELLEN SAYS DEBT SERVICE COSTS WILL BE 1% OF GDP FOR THE NEXT DECADE. – Reuters

Her statement implies that the economy will be strong and the government will run budget surpluses, or interest rates will be near zero for the next ten years.

Instead of guessing what she is pondering, we do some math and arrive at the only possible answer.

The Government Can’t Afford Today’s Interest Rates Before walking through various scenarios to figure out what Yellen may be implying, it’s helpful to provide background on what drives her mindset. In our article The Government Can’t Afford Higher For Longer, Much Longer, we shared the following graph and commentary:

Total federal interest expenses should rise by approximately $226 billion over the next twelve months to over $1.15 trillion. For context, from the second quarter of 2010 to the end of 2021, when interest rates were near zero, the interest expense rose by $240 billion in aggregate. More stunningly, the interest expense has increased more in the last three years than in the fifty years prior.

The graph above is just the tip of the fiscal iceberg. Every month, lower-interest-rate debt matures and will be replaced with higher-cost debt.

“WHAT ARE INTEREST COSTS ON THE NATIONAL DEBT?

“In 2022, the federal government spent $476 billion on net interest costs on the national debt. That total, which grew by 35 percent from $352 billion in 2021, was the largest amount ever spent on interest in the budget, and equaled nearly 2 percent of gross domestic product (GDP). Interest costs are on track to become the largest category of spending in the federal budget — but what comprises the government’s net outlays on interest, and what affects the size of such costs?

HOW MUCH DOES THE GOVERNMENT SPEND ON INTEREST?

In the late 1970s, the increasing national debt and higher interest rates led to a boost in interest costs, which reached a historic high of 3.2 percent of GDP in 1991 (looking at interest costs as a percentage of the economy allows for a standardized comparison over time). But smaller budget deficits and lower interest rates decreased that ratio over the following decade. Between 2007 and 2020, outlays for interest remained steady at around 1.5 percent of GDP (even though borrowing related to the financial crisis and pandemic was quite high), mostly because of low interest rates. But due to the recent rise in inflation and interest rates, as well as the mounting public debt, interest payments have grown rapidly over the past two years, and they are projected to continue growing. The Congressional Budget Office (CBO) projects that interest costs will exceed their previous high relative to the size of the economy, reaching 3.2 percent of GDP ($1.1 trillion) in 2029.

https://www.pgpf.org/budget-basics/what-are-interest-costs-on-the-national-debt

There is no source for Janet Yellen saying anything remotely comparable to what “Confounded Interest” “Anthony Sanders” “Tyler Durden” and “Michael Lebovitz CFA” are saying here. Search for “Yellen Reuters” in the last week and there is no record of her saying this. None of these clowns have provided a link to where or in what context she supposedly said this. However Biden himself said that we are REDUCING THE DEBT which is a delusion or lie or both but certainly 1.7 trillion away from any shred of truth. I pray Yellen is not as stupid as her boss, but anyone who has a link to her statement, fire away, I think this is the aformentioned “pundits” circle-jerking - they are just quoting each other but Yellen never said this. Provide a link if anyone can find it. My unshakable faith in the truth of everything that someone writes on the internet is being challenged.

B House should pass appropriations for specific functions and make them smaller than in the past. They should avoid omnibus bills the merge frills into must have legislation.

Biden, Schumer, Senate R and D should accept that the pain of inflation is worse than the paid of less spending.

Furthermore, if we were all more productive we would pay more taxes. The government is killing productivity with its massive increase in nuisance regulations.

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