Posted on 12/27/2022 8:59:57 AM PST by tired&retired
The US Debt is very interest rate sensitive. While the average outstanding maturity of the US Debt is 5 to 6 years, this data reveals much more.
Two Year Interval Debt (as of 2021)
Treasury Debt. $22.584 trillion
Mortgage Backed Securities. $12.202 trillion
These are Fannie Mae, Ginnie Mac, ...
WHAT HAPPENS WHEN THE AGENCY DEBT COST (OFF THE BOOKS DEBT) EXCEEDS THE 30 YEAR MORTGAGES AT 3% AND 4% ?
We could easily default on all the agency debt as the short term interest rate we must pay is many times the fixed rate long term mortgages receivable rate. This debt is not included in our US Debt as it is considered "Agency Debt."
ABOUT SIFMA SIFMA is the voice of the U.S. securities industry. We advocate for effective and resilient capital markets.
I see the dollar crashing and a new state currency, or a consortium of states coming up with a new currency.
Maybe we should join the Euro since our currency is now about par! Just kidding.
That’s what I see also. And even if by some nutty sequence of events the dollar doesn’t crash, I think it’s gonna be very high interest rates, or very high inflation. Our country has never faced anything like this. And even worse, the people running things are determined to bring in an authoritarian socialist-based government. This is a design, not happenstance that they couldn’t have foreseen.
Interest Rate and Total Debt
2022 Fiscal Year
2.07% Average Interest Rate
$30.93 Trillion Total Debt
“ We only pay income tax so that the government has some control on us.”
In truth, we don’t pay taxes any longer. Now we are paying tribute.
For any other beancounters that want to look at the details.
The most recent U.S. Government Financial Report
https://fiscaldata.treasury.gov/static-data/published-reports/frusg/FRUSG_2021.pdf
Congressional Budget Office
Federal Net Interest Costs: A Primer
https://www.cbo.gov/publication/56910
Is the Federal Reserve Printing Money in Order to Buy Treasury Securities?
https://www.federalreserve.gov/faqs/money_12853.htm
Per the Federal Reserve Website
“Although Federal Reserve purchases of Treasury securities do not involve printing money, the increase in the Federal Reserve’s holdings of Treasury securities is matched by a corresponding increase in reserve balances held by the banking system. The banking system must hold the quantity of reserve balances that the Federal Reserve creates.
Ordinarily, an increase in reserve balances in the banking system would push down current and expected future levels of short-term interest rates; such an action would serve to boost the economy and variables like bank lending and the money supply. If maintained for too long, a relatively high level of reserve balances and a low level of short-term interest rates could lead to the buildup of inflation pressures.
However, with short-term interest rates already near zero, an increase in reserve balances by itself cannot push short-term interest rates much lower. As a result, the current elevated level of reserve balances has not generated an increase in inflation pressures.
However, the Federal Reserve monitors inflation and inflation expectations carefully and is prepared to take appropriate actions to adjust policy so as to foster its dual mandate.”
So if a person has a $1 million plus 401K, should they shift it to short term government securities.
How do you diversify to minimize risk in this crazy market?
The irony is that you can find quotes from most of our leaders today about debt and the dangers of deficit spending years ago.
It seems like our nations leaders, observers (media), and bankers have lost their grasp on reality. It is almost biblical because the story can only end one way - great pain for the people and a loss of reserve currency status.
This paves the way for a more authoritarian “government” and one world government for whomever controls the reserve currency and central bank (it won’t be the US). We will cease to be a “superpower” quickly because maintaining and projecting “force” is very expensive.
The current numbers are staggering and the future “promises” of entitlements are incomprehensible. There is no way we could maintain the status quo, meet our promised obligations, and service the interest on the debt. The “dollar” as we think of it is dead.
The US is not all that popular around the world and imagine what our “brand” is going to look like after we collapse central banks all around the world. Our nation is woefully ignorant about economics and as you say - our leaders are either more stupid than we thought or this is deliberate.
I have felt that way for decades. I just changed my tagline to the only thing that fits...... a grand delusion and time of lies.....
I was just quoted 6.4% by Chase for a 30 year, no points
“If we lose the Petro Dollar, we are toast.”
That is why, IMO, we are in a proxy war with Russia and trying to economically deflate China. Those two have been attempting to undermine the “Petro Dollar”. If they succeed we are going to have Argentina type inflation.
I 100% agree with you.
The only silver lining is that I’m old enough that I lived my life and don’t care if I die today...
But I stocked up on popcorn bigtime to set back and watch the chaos unfold! 😁
Yeah the 13% I got in Jan 1980 was a bargain!
The Fed buys debt by printing money.
The US is doing this in part by increasing the money supply outside of our country. And raising rates will stop pegs to the US dollar that are not backed by one or more of these things.
I don’t have a good answer for retirement funds nor do I see any place to hide that much wealth, much less secure it.
The “government” seizes from those who saved to save those who did not. They will fail to protect those who did save from those who did not. This is our reality now and the real theft may simply be in the value of a dollar (the hidden tax of inflation).
It is obvious. Society is far more fragile than we think but not all “communities” are the same.
Someone will come along and suggest precious metals as if the government will somehow not seize that too. They just took peoples businesses and livelihood for a flu. They took away your rights to corporate worship. Private property may not be safe or “private” after others learn you have things of value.
We are in deep doo-doo friend. I wish I had an answer because I am now retirement eligible also and in the same boat. I have lost 25% of my “retirement” this year when you adjust for inflation and most of my “wealth” on paper remains in my house/acreage that my county taxes heavily. I don’t expect to see a dime of social security either or if I do it will be worthless.
I am more worried about my children and their future because they matter most. The cataclysm is coming and “security” will not be found by “investing” with those who caused it. When the government defaults on its debt the instruments will be worthless. When the government tries to inflate their way out of this mess the instruments will be worthless. They got you either way.
They will seize or try to seize anything for the “collective good” and they won’t be there to protect your “stuff” any more than your “investments”.
Hopefully you live in a good community (away from metro areas), have some stuff on hand to get over the hump and help those around you do the same, and most importantly you have faith!
This may not fall apart as fast as some think or it could. I don’t know. I kinda wish we would get it over with so I can help my kids navigate it, but that is why we try to teach them real life skills because they will need those more than ever!
TAXES FOR REVENUE ARE OBSOLETE
by Beardsley Ruml
Chairman of the Federal Reserve Bank of New York
https://www.nakedcapitalism.com/2019/07/taxes-for-revenue-are-obsolete.html
Not a clue. I just see the trouble coming. If I knew the answer to that I’d already be rich!
I agree with you. Gonna review 2nd Thessalonians.... been a while.
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