Last year it was $359 billion. The year before it was $454 billion… $413 billion before that… $383 billion before that.
All told, you and I have paid over $2 trillion in interest to China and other creditors in the past five years.
And yet I was shocked to learn that in the first fiscal quarter of 2013, that number now sits at $133 billion.
That means one thing: We’re on track this year to record the highest interest payments in the history of the United States – $532 billion.
Think about this: Total revenue from corporate taxes in 2012 does not even cover HALF of the interest payments on our debt…
So, have we hit the point of no return? Is there another possible ending to this story where everyone gets paid?
Let’s look further into the facts to find out…
Since 1931, the U.S. debt has increased every year except for four.
In fact, it’s been growing at an exponential rate, meaning every year the increase gets larger and larger.
When a Treasury bond comes due, the U.S. government just sells another bond to pay off the previous one.
Given the short maturity of U.S. government bonds, it’s very possible that in any given year, over $5 trillion in debts will come due.
By the way… That is roughly three and a half times the total annual tax receipts of the United States. At that rate we already know it would take decades to pay it off just a little every year.
BUT WHAT HAPPENS WHEN THE FEDERAL RESERVE CAN NO LONGER KEEP INTEREST RATES AT NEAR ZERO?
I’ve written that in capital letters for a reason. Because what happens when interest rates are allowed to rise to normal levels is INCOMPREHENSIBLE.
Look at this chart:
We’ve just had the lowest interest rates in the history of our country last year, at 1.53%.
My parents in their retirement used to supplement their income with the interest they got from CDs. With rates at 1.87% today, that’s a losing proposition.
The highest interest rates have ever reached is 15.32%. But here’s the thing: The mean rate is 4.64%. In essence, that’s the average rate of interest over time.
What I’d like people to know is this: While Bernanke has artificially kept rates low to cater to his banking friends and help them make money…
They cannot be manipulated in this Madoff-style Ponzi scheme for much longer.
When they hit the mean, at 4.64%, the interest payments of the U.S. government will increase by 148%, more than one and a half times what they are now.
At current projections for 2020, that would take the interest payments on U.S. debt to $1.3 trillion a year.
But here’s the thing: Our current total tax revenue stands at just $1.4 trillion.
Now, I’m not one to push my own conclusions on people. But I’ll share mine here anyway.
- While we have the lowest interest rates in history, the debt we owe to China and our other creditors is still increasing at an exponential rate every year.
- When interest rates rise, the Federal Debt cannot be paid off. Ever.
Says renowned investment expert, Peter Schiff:
“This is precisely the way that Bernie Madoff ran his investment business. It ‘worked’ great for a while…”
You already know that this fiscal disease has its roots in the halls of the United States Congress and the corridors of the White House.
Like most diseases, it progresses slowly at first, over many years. Yet it devours its victims at an ever-increasing rate.
That’s when life turns from hours into minutes, and minutes into seconds.
That’s where we are now. Seconds.