Servicing the US National Debt: the Inevitable Disaster

Greetings. We all know that the financial situation of the US is a complete disaster, so I'll just get right to the point. With all the focus on the current government shutdown and the budget fights over Obamacare, here's my take on a point that is often lost in the shuffle:

The current interest rate that the US Treasury pays on the national debt (almost $17 trillion right now) is approximately 2.4 percent. That means servicing the debt (paying interest to a private entity for money that does not exist) costs around $410 billion a year.

The reason that servicing the debt is manageable right now is that the Fed has artificially pushed interest rates low through QE.

Historically, this interest rate has averaged out to be around 5.7 percent. The national debt has risen to ridiculous levels during a period of time where the artificially low interest rate of 2.4 percent has facilitated a financial environment for this absurd debacle to continue.

If the interest rate were to rise back to 6.0 percent, servicing the debt now costs 1 TRILLION dollars per year... that's just to pay the interest!

The total amount collected by the government for personal income taxes in 2012 was 1.1 trillion dollars. This means that if interest rates were to rise up, almost all of the tax dollars will be used up just to pay the interest on our debt.

Eventually, and sooner than you think, the national debt will surpass an amount that can be serviced. Inevitably, the dollar must collapse. I believe I will see this financial collapse within my lifetime if I am careful not to cross the street in front of a donut truck.

In my opinion, the Federal Reserve system represents the greatest crime perpetrated in the history of mankind. And as for banking in general, the ultimate racket is to get the entire world to pay you interest on something that does not exist, and they have achieved just that.

Here's a great article: The Fed's 'hidden agenda' behind money-printing

The article ends as follows:

And if Americans find out that the lion's share of their income tax payments are going to service the debt, prepare for a new American revolution.

Yeah, right... to revolt, one must get up off the couch.

reply to post by InTheFlesh1980


I saw this - this morning at Quartz:

qz.com...

The markets are starting to look like they seriously think the US might not pay its debt

I believe, my understanding of these matters is limited, this article backs up your point - which is well taken by the way and rarely taked about.

I thought you would be interested and might simplify the deliberately arcane Finance (Master's of the Universe) jargon.

qzprod.files.wordpress.com...

Yea, I've known this for a while now. This is why QE infinity will remain just that, infinity. If the Fed ever turned off the tap, our economy would instantly collapse. But that doesn't matter anyways, eventually the debt will rise to the level that even with the 2.4% we service the debt at now, we would end up putting all of our taxes towards the interest. That is when the fun starts because if the debt rises at that point then even with all our tax money combined, we wouldn't even be able to pay the interest meaning that it would be feasibly impossible for us to EVER pay the debt off and it would rise to infinity exponentially. And calculus has taught me that exponential curves have the highest rates of change (derivative graph) of any other function.

This is why the debt ceiling talk is all meaningless, the higher we raise the debt ceiling the harder it is to pay the debt back and the more likely that we won't be able to service the debt. The great (awful) thing about interest is that it works through percentages and whenever the base number goes up, so does the interest number. The cost of servicing the debt today won't be the cost to service the debt tomorrow.

Even with the current government shutdown we are STILL spending outside our means. The debt is STILL climbing with all these unessential employees furloughed. Now it appears that the furloughed people will be getting backpay, so let's just call it what it is now, an unscheduled paid vacation.

reply to post by InTheFlesh1980


Yes.

The purpose of the income tax is to service (pay interest on) the debt.
All other spending is borrowed.

Is it a coincidence that the Federal Reserve was created at the same time as the federal income tax?

Krazysh0t
...the higher we raise the debt ceiling the harder it is to pay the debt back...

The federal reserve system was a trap. The very first federal reserve note that was borrowed was debt, payable with interest. From day one, there has been more owed than that exists. By definition, it is not repayable.

reply to post by Krazysh0t

This is why the debt ceiling talk is all meaningless, the higher we raise the debt ceiling the harder it is to pay the debt back and the more likely that we won't be able to service the debt. The great (awful) thing about interest is that it works through percentages and whenever the base number goes up, so does the interest number. The cost of servicing the debt today won't be the cost to service the debt tomorrow.

I think the fiat currency model of perpetual inflation is inherently doomed by design.

The financial powers that benefit from the system have taken extraoridinary measures to extend the ruse like a teetering house of cards, but even they know it cannot continue forever. I have not seen a single long-term financial model that can convince me otherwise.

I do not think we are at the end of the road just yet. The recent "financial crisis" in Washington is just a political show, and after the politics are over the system will continue for awhile. How long? I don't know. But you don't have to be a financial genius to see the writing on the wall.

I think it's going to get a lot, LOT worse toward the end. All the stuff we talk about on ATS... financial collapse followed by civil unrest, massive unemployment, food and fuel shortages, rampant crime, decimation of retirement savings, the whole nine yards. And then... revolution? I hope I'm wrong.

Not telling me anything I'm not aware of in regards to the Fed. Oh, I'm sorry I meant to say the Third Bank of the United States. 1st BUS 2nd BUS. Calling the 3rd BUS the Federal Reserve was done on purpose since the first two banks were known for their rampant corruption. Not to mention that they are all partially privately owned and partially federally owned.

Heh, you guys have gotten me onto one of my favorite topics here at ATS, the conspiracy of the Federal Reserve. But really they are responsible for just about all the mess our country and our allies are in right now (after all the EU uses the same lie based fiat currency that we do).

Someone just needs to dump a crapload of gasoline on DC and burn it to the ground!

All the debt is electronic. So why not create a virus that wipes it away.

The debt is make believe.

It is an artifact of the privatisation to the banks of that essential and defining government privilege of coining the national currency.

Banking is legalised fraud.

The debt isn't real.

It's mainly to yourselves.

Oulaw and disband the banking system and cancel the debt by decree.

It is that simple.