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How Will America Service Her Debt?
Auguest 15, 2013 | MosesKnows

Posted on 08/15/2013 1:19:31 PM PDT by MosesKnows

How Does America Service Her Debt?


It has been interesting to monitor and track the Dow Jones Average on those days when the Fed’s actions regarding Quantitative Easing is in the news. Lately the news is about whom Obama will appoint to replace Ben Bernanke. This brings up concern about how the new Federal Reserve Chairman will administer Quantitative Easing. The Dow seems to drop considerably with any mention of the Feds easing the easing. Quantitative Easing (I’ve lost track of the numbers) is averaging $85,000 million each month. The market appears to favor the continued borrowing and accumulation of debt. However, as it must, Quantitative Easing will diminish and stop at some point in time.

How much is the increase in debt service when America has to pay 1% more in interest to attract lenders?

To make answering simpler I did not include unfunded liabilities, I fixed the debt at $17 Trillion, I fixed payments at two times a year, and I used round numbers. Calculations include ten and thirty year maturities.

To service a $17 Trillion loan over 10 years with a 2% interest rate it will cost the borrower, America, $3.4 Trillion over the life of the loan plus the return of the $17 Trillion in principal when the loan matures.

The government does not pay down the principle over the life of the loan, as is the practice with home mortgages.

If the interest rises 0.5% that same $17 Trillion 10 year loan would cost $4.25 Trillion in interest plus the return of the $17 Trillion in principal when the loan matures.

If the interest rises 1.0% that same $17 Trillion 10 year loan would cost $5.1 Trillion in interest plus the return of the $17 Trillion in principal when the loan matures.

I can recall over my lifetime interest rates on government financial instruments between 2% and 12%. If the interest were 6% that same $17 Trillion 10 year loan would cost $10.2 Trillion in interest plus the return of the $17 Trillion in principal when the loan matures.

What about the same loan but for 30 years instead of 10 years?

To service a $17 Trillion loan over 30 years with a 2% interest rate it will cost the borrower, America, $10.2 Trillion over the life of the loan plus the return of the $17 Trillion in principal when the loan matures.

If the interest rose 0.5% that $17 Trillion 30 year loan would cost $12.75 Trillion in interest plus the return of the $17 Trillion in principal when the loan matures.

If the interest rose 1.0% that same $17 Trillion 30 year loan would cost $15.3 Trillion in interest plus the return of the $17 Trillion in principal when the loan matures.

If the interest were 6% that same $17 Trillion 30 year loan would cost $30.6 Trillion in interest plus the return of the $17 Trillion in principal when the loan matures.


TOPICS: Chit/Chat; Government; Politics
KEYWORDS: america; debt; service
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To: MosesKnows

Dear FReepers, allow me to introduce you to a new word:

Restructuring.

Have a nice day.


21 posted on 08/15/2013 1:59:30 PM PDT by VRW Conspirator (Producing Talk Show Prep since 1998.)
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To: Resolute Conservative

All three.


22 posted on 08/15/2013 2:02:44 PM PDT by tumblindice (America's founding fathers: All armed conservatives.)
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To: MosesKnows

Not to worry..........we still can keep handing out Obamaphones and EBT’s, so we have The Messiah to save us all.


23 posted on 08/15/2013 2:03:11 PM PDT by traditional1 (Amerika.....Providing public housing for the Mulatto Messiah)
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To: MosesKnows

We will replay the video of Obama saying “We don’t have a debt problem.” and the media will repeat it enough until our creditors believe it.


24 posted on 08/15/2013 2:05:26 PM PDT by Secret Agent Man (Gone Galt; Not averse to Going Bronson.)
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To: MosesKnows

Americans are reveling in their increased “wealth” because of increased stock prices according to the MSM regime cheerleaders. But when you try to cash in on some of that wealth, the stock market dives like it did today. The Progressives are biding their time to allow inflation, not just plain old inflation, but hyper-inflation to eliminate the debt. Foreigners are dumping the dollar like crazy and buying hard assets before the dollar becomes worthless.


25 posted on 08/15/2013 2:06:10 PM PDT by RetiredTexasVet (The only growth industries left under Progressives are government and poverty.)
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To: blackdog
It’s phony debt. Stop paying attention to it and it will go away.

Close, but not quite. The minute the ChiComs and Saudis cut off our credit they can no longer sell us oil or crap for Walmart. Shortly after the pitchfork mobs will be hanging their leaders from lampposts. So it's like Mutually Assured Destruction. Scam of the Millennium.


26 posted on 08/15/2013 2:09:56 PM PDT by Buckeye McFrog
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To: MosesKnows
Like this...

US liquidating it's best companies

27 posted on 08/15/2013 2:11:01 PM PDT by DannyTN
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To: MosesKnows
Like this...

US liquidating it's best companies

28 posted on 08/15/2013 2:11:01 PM PDT by DannyTN
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To: MosesKnows

The debt will be repudiated, of course.


29 posted on 08/15/2013 2:12:18 PM PDT by Jim Noble (When strong, avoid them. Attack their weaknesses. Emerge to their surprise.)
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To: MosesKnows
Sell the coastal half of California. Should be worth about $8 trillion.

Sorry...

5.56mm

30 posted on 08/15/2013 2:18:18 PM PDT by M Kehoe
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To: subterfuge
Anything in the millions is chump change

It is not chump change when it is thousands of millions as in billions or millions of millions as in trillions.

31 posted on 08/15/2013 2:31:31 PM PDT by MosesKnows (Love many, trust few, and always paddle your own canoe.)
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How? By handing over our land, minerals, and pristine parks. We shall be strip mined.


32 posted on 08/15/2013 2:34:15 PM PDT by combat_boots (The Lion of Judah cometh. Hallelujah. Gloria Patri, Filio et Spiritui Sancto!)
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To: MosesKnows

Yep. When the QE stops, the debt balloon will pop. Bonds will collapse. Interest rates everywhere will skyrocket. Economic activity will screech to a halt. Pensions will stop. Most government employees will be laid off permanently. Police agencies will remain employed to stop former pensioners and employees from rioting.


33 posted on 08/15/2013 3:08:43 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
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To: MosesKnows

As government employees and pensioners lose their incomes, their foreclosed properties will be sold to the Chinese.


34 posted on 08/15/2013 3:13:55 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
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To: familyop
No it won't
35 posted on 08/15/2013 3:17:18 PM PDT by MosesKnows (Love many, trust few, and always paddle your own canoe.)
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To: Buckeye McFrog
Whom do we ... owe?

The fed?

Just a bunch'a guys with worthless pieces of paper.


Other nations?

Call in our WW2 markers.


We have power to wake up tomorrow debt free.

36 posted on 08/15/2013 3:18:57 PM PDT by knarf (I say things that are true ... I have no proof ... but they're true)
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To: MosesKnows

Hang socialists

Socialism Is Legal Plunder - Bastiat

BIG GOVERNMENT IS CRONY SOCIALISM

http://www.usdebtclock.org


37 posted on 08/15/2013 3:49:06 PM PDT by PGalt
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To: MosesKnows

The debt regime, sitting happily on its fat posterior and producing nothing of real value, can crash slowly with QE or more suddenly without. It doesn’t matter to me. Either way, I’ll produce and sell something useful, when they’re picking up trash for their daily bread.


38 posted on 08/15/2013 3:58:14 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
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To: MosesKnows
"To make answering simpler I did not include unfunded liabilities,..."

How nice. A little over a year ago, with unfunded liabilities included, the real debt was around $266 trillion. Eventual bond collapse and fulfilment of the default process are inevitable. There's no magic money tree that doesn't need a large domestic manufacturing base for real wealth.


39 posted on 08/15/2013 4:18:34 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
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To: MosesKnows

imho there are two things that have kept the dollar trending essentially sideways for the last two years.

The first is that the USA is producing 1 million barrels@ day more this year as it did last year and looks to produce 1 million barrels@ day more next year. This changes real world capital flows.

The second big thing that’s happening is that the federal deficit is falling fast. Current estimates are that the federal deficit will fall from 1 trillion last year to 650 billion this year. If deficits fall next year by similar amounts then the federal deficit will fall within normal ranges of years past.

Things could happen very quickly —like US growth rates could expand—for example if the supreme court declares obamacare unconstitutional this fall/winter. That’s very much in the cards as they have moved up a couple of key cases to their dockets.

Fast US growth rates would knock out the federal deficits in a year or two—and the fed would be forced to stop printing money.


40 posted on 08/15/2013 5:20:41 PM PDT by ckilmer
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