General Discussion

marmar

(77,080 posts) Thu Mar 29, 2012, 11:51 AM Mar 2012

Four Numbers Add Up to an American Debt Disaster

(Bloomberg) Consider the following numbers: 2.2, 62.8, 454, 5.9. Drawing a blank? Not to worry. They don’t mean much on their own.

Now consider them in context:

1) 2.2 percent is the average interest rate on the U.S. Treasury’s marketable and non-marketable debt (February data).

2) 62.8 months is the average maturity of the Treasury’s marketable debt (fourth quarter 2011).

3) $454 billion is the interest expense on publicly held debt in fiscal 2011, which ended Sept. 30.

4) $5.9 trillion is the amount of debt coming due in the next five years.

For the moment, Nos. 1 and 2 are helping No. 3 and creating a big problem for No. 4. Unless Treasury does something about No. 2, Nos. 1 and 3 will become liabilities while No. 4 has the potential to provoke a crisis.

In plain English, the Treasury’s reliance on short-term financing serves a dual purpose, neither of which is beneficial in the long run. First, it helps conceal the depth of the nation’s structural imbalances: the difference between what it spends and what it collects in taxes. Second, it puts the U.S. in the precarious position of having to roll over 71 percent of its privately held marketable debt in the next five years -- probably at higher interest rates. ..................(more)

The complete piece is at: http://www.bloomberg.com/news/2012-03-28/four-numbers-add-up-to-an-american-debt-disaster.html

3 replies

= new reply since forum marked as read

Highlight:

Four Numbers Add Up to an American Debt Disaster (Original Post) marmar Mar 2012 OP

Interesting. Nt xchrom Mar 2012 #1

K&R !!! Citizens need to hear and understand more information like this so RKP5637 Mar 2012 #2

How you can tell this author is an idiot jeff47 Mar 2012 #3

xchrom

(108,903 posts)

1. Interesting. Nt

Reply to marmar (Original post)

Thu Mar 29, 2012, 11:58 AM

Mar 2012

RKP5637

(67,108 posts)

2. K&R !!! Citizens need to hear and understand more information like this so

Reply to marmar (Original post)

Thu Mar 29, 2012, 12:06 PM

Mar 2012

they understand where we are headed. I've listened to many people I know thinking everything is just fine ... that I'm an alarmist and a conspiracy type. The old saying, "you can lead a horse to water, but you can't make them drink it."

jeff47

(26,549 posts)

3. How you can tell this author is an idiot

Reply to marmar (Original post)

Thu Mar 29, 2012, 02:26 PM

Mar 2012

First:

The U.S. is more dependent on short- term funding than many of Europe’s highly indebted countries, including Greece, Spain and Portugal

Hey dumbass! Those countries don't have their own currency. They are effectively hamstrung as if they were on the gold standard. The US isn't.

The US can not default. Because it can literally print more money. That may cause inflation problems, but the debt will be paid.

Second: The article is full of doom and gloom and how we're all about to go broke....and then you find this gem.

In fact, when Treasury bills carry a negative yield -- when investors are paying the government to hold their money for three, six or 12 months -- borrowing “more is better,” Crandall says.

Yep. Our government is literally getting paid by investors to take their money. Yet we're supposed to panic because at some time in the future that may change. Well, dumbass, are you arguing it will morph overnight? No? Don't you think that would then give the government time to respond? Oh, so maybe this isn't disaster.

This article is yet more scary-sounding bullshit designed to push austerity policies that do not work, and would create a much larger financial crisis.

Reply to this discussion