Rising interest rates of US Debt

deanhills · Jun 4, 2009

I found an interesting article on the ramifications for world growth as a result of the rising interest rates of US Debt. Do you think this is exaggerated, or is MYP's predictions regarding the negative effects of the 1.2-trillion bail-out package now coming true?

Increased rates could translate into hundreds of billions of dollars more in government spending for countries like the United States, Britain and Germany.
Even a single percentage point increase could cost the Treasury an additional $50 billion annually over a few years — and, eventually, an additional $170 billion annually.

http://www.nytimes.com/2009/06/04/business/economy/04rates.html?_r=1

myp · Jun 4, 2009

History, economics, and the structure of global financial institutions. The evidence is all right in front of us- it is just a matter of whether we choose to see it or we give ourselves false hope by following the likes of Geithner. I hate to be the one always being negative, but the way the government is currently conducting itself is simply disastrous and for those that neglect it, they will be forced to accept it when everything plays out in the end, just like they had to accept the housing meltdown.

deanhills · Jun 4, 2009

myp said:
History, economics, and the structure of global financial institutions. The evidence is all right in front of us- it is just a matter of whether we choose to see it or we give ourselves false hope by following the likes of Geithner. I hate to be the one always being negative, but the way the government is currently conducting itself is simply disastrous and for those that neglect it, they will be forced to accept it when everything plays out in the end, just like they had to accept the housing meltdown.

I am now more certain than ever before that in the distant future they will think back to January 2009 as when the bail-outs should never have happened. That all it succeeded to do was to get people to party again instead of buckling up where they needed to buckle up. Irony is that those people who needed the bail-out funds most, did not really get it, I'm referring to those unemploymed, who lost businesses because of border-line finance and loan issues, and genuine real estate deals.

The Parakeet · Jun 5, 2009

The math sounds right. We pay $400 billion maintaining the debt. A single point would probably knock it up a good bit.

Then again...it would be a little weird for it to just go up. US debt is still considered the safest thing around. People have been panicking and saying that we're "just about" to lose are AAA rating for awhile now. It's actually impossible for us to default, so there is no reason for them to even decrease it. Worse comes to worse, we can just print more money

. We can though, unlike other governments, since the debt is in US dollars.

So...the only way interest rates would go up would be if there was a really good reason for people to want more money just for lending. If that happens, then I guess we'll deal with it. It would actually act as an impetuous for paying off the deficit, so it would be better in the long run.

deanhills · Jun 7, 2009

The Parakeet said:
So...the only way interest rates would go up would be if there was a really good reason for people to want more money just for lending. If that happens, then I guess we'll deal with it. It would actually act as an impetuous for paying off the deficit, so it would be better in the long run.

So in essence the US is good with fiddling with debt? Obama might just as well have borrowed 3-trillion?

myp · Jun 10, 2009

deanhills said:
So in essence the US is good with fiddling with debt? Obama might just as well have borrowed 3-trillion?

No- certainly not. I don't know where Parakeet is getting this "we are safe" attitude from, but it is not impossible for us to lose the AAA and it is certainly possible for us to default. You say we can simply print the money, but looking at history that never works out with debts like this because it means drastic inflation, which cripples the economy.

As for losing the AAA- as soon as the USD loses its value as the reserve currency of the world it is very possible. Don't think it will lose its position as the reserve? If not, then how do you explain Russia and China looking into gold-based as well as Euro-based reserve systems?

Dirk · Jun 14, 2009

myp said:
No- certainly not. I don't know where Parakeet is getting this "we are safe" attitude from, but it is not impossible for us to lose the AAA and it is certainly possible for us to default. You say we can simply print the money, but looking at history that never works out with debts like this because it means drastic inflation, which cripples the economy.

Yeah, and now Gordon Brown, the unelected Prime Minister of the UK, has introduced Quantative Easing (i.e. printing dosh) to the UK.

curious · Jun 19, 2009

Dirk said:
Yeah, and now Gordon Brown, the unelected Prime Minister of the UK, has introduced Quantative Easing (i.e. printing dosh) to the UK.

You make it sound as if he isn't legitimately in that position. That's the way parliamentary systems work. The Prime Minister is never directly elected. The party that gets the majority in the House of Commons chooses someone to be Prime Minister. No Prime Minister is ever elected. Churchill wasn't elected. Margaret Thatcher wasn't elected. Not really.

And of course, Gerald Ford wasn't elected either. Or Lyndon Johnson until his second term. There are legal mechanisms for succession. They were followed.

curious · Jun 19, 2009

And back to the original topic.

Obama did just borrow the trillion, a great deal of it from the Chinese.

If the US dollar ceases to be the safe haven currency, then there will be serious ramifications. But for now it is still the place people put their money when they want to be sure it will be there when the debt instrument matures. If such a change happens rapidly, it will be because of major upheavals. If it happens slowly, we will adjust somehow.

I do think the interest rate is an issue. The one good thing about taking on so much debt is that we were getting the money and paying very low interest on it. So the debt burdern was equivalent to much less than it would have been when interest rates were 5% or so. Now that seems to be going away.

Dirk · Jun 20, 2009

curious said:
You make it sound as if he isn't legitimately in that position. That's the way parliamentary systems work. The Prime Minister is never directly elected. The party that gets the majority in the House of Commons chooses someone to be Prime Minister. No Prime Minister is ever elected. Churchill wasn't elected. Margaret Thatcher wasn't elected. Not really.

And of course, Gerald Ford wasn't elected either. Or Lyndon Johnson until his second term. There are legal mechanisms for succession. They were followed.

Well, Gordon Brown, when he assumed leadership of the Labour Party, did not stand for reelection. We did not vote for the New Labour Party when Gordon Brown was in charge.

Oh, and most political parties elect their own leader. Except for some... *glances at parties on the far right of the political spectrum*

Tony Blair should have called another election. Not said, "you're having Grumpy Gordie, and you ain't got no choice in the matter."

I'm not chuffed about the Conservative Party getting in (which they will), but i'm starting to think it might be better than this relentless privatisation and the gradual development into a police state that New Labour are bringing.

And i'm sure it's easy to tell, i don't think much of most countries' systems. Because i want democracy. True democracy.

curious · Jun 21, 2009

Won't their be more privatization under the Conservatives? Didn't they start it all? I'd have sworn Thatcher was a Conservative.

One of the advantages of a parliamentary system is that you don't have a statutory length of time you have to wait to get a change in government. One of the disadvantages is that a system where the current government decides when elections are going to be held allows them to time them in ways that extend their control.

I don't see England going to a direct elction for prime minister any time soon, so you are stuck.

Dirk · Jun 21, 2009

curious said:
Won't their be more privatization under the Conservatives? Didn't they start it all? I'd have sworn Thatcher was a Conservative.

One of the advantages of a parliamentary system is that you don't have a statutory length of time you have to wait to get a change in government. One of the disadvantages is that a system where the current government decides when elections are going to be held allows them to time them in ways that extend their control.

I don't see England going to a direct elction for prime minister any time soon, so you are stuck.

Ol' Maggie was Conservative, yes. But these days the Tories aren't right-wing extremists. They don't advocate a police state (any more), they haven't explicitly said they'll privatise Royal Mail, and they appear to be for decentralisation of powers and more democracy.

However, i'll continue voting Socialist/Green/Communist. I hate the main parties.

deanhills · Jun 23, 2009

Dirk said:
Ol' Maggie was Conservative, yes. But these days the Tories aren't right-wing extremists. They don't advocate a police state (any more), they haven't explicitly said they'll privatise Royal Mail, and they appear to be for decentralisation of powers and more democracy.

However, i'll continue voting Socialist/Green/Communist. I hate the main parties.

I thought you were going to start your own party ....

curious · Jun 25, 2009

Maybe I should have a political party to go with my new religion. Oh, no, that would violate separation of church and state. I guess I'll just have to be content with chocolate worship. No moving the the capital to Hershey, Pennsylvania, I guess.

deanhills · Jun 28, 2009

curious said:
Maybe I should have a political party to go with my new religion. Oh, no, that would violate separation of church and state. I guess I'll just have to be content with chocolate worship. No moving the the capital to Hershey, Pennsylvania, I guess.

Right, at least you will be able to get some good chocolate as well ....

curious · Jun 29, 2009

I could subsidize imports of Godiva chocolates. The bars with dark chocolate and raspberry.

deanhills · Jun 30, 2009

curious said:
I could subsidize imports of Godiva chocolates. The bars with dark chocolate and raspberry.

Now you're talking, I absolutely love those.

curious · Jun 30, 2009

Everyone would be issued one every day, free. Now there is government waste I could live with.

deanhills · Jul 2, 2009

curious said:
Everyone would be issued one every day, free. Now there is government waste I could live with.

Right! I probably would get horribly addicted.

Rising interest rates of US Debt

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