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Will High Interest Rates Wreck America (and Maybe the World)?

Nov 28, 2010
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The Fed has signaled it will dial back the rate increases, but is the damage already baked in? Or have they judged it just right?

Many people talk about the rate increases increasing the likelihood and severity of a recession.

Many people also talk about the rate increases creating unemployment.

What few people have talked about much yet is the impact of rising interest rates on the national debt.

The more of the budget you have to spend to cover interest on the debt, the less you have to spend on the normal, already-approved functions of government.

What should we do?

Here are a couple of good links from highly-rated sources and a chart.



how-does-inflation-affect-the-federal-budget-chart-1.jpg



The Conversation​



The Conversation - Least Biased - Credible
Factual Reporting: Very High - Credible - Reliable



Peterson Foundation​



Peterson Foundation - Least Biased - Credible - Reliable
Factual Reporting: High - Credible - Reliable


 
Your fear mongering is about 3 months to0 late. Please keep up. The market believes the feds will raise another 25 bps and the terminal rate will be about 5-5.25%. They will keep them there for the year to fight off inflation and lower rates in 2024 if inflation is sufficiently depressed. With inflation as hot as it was last year, I'd be surprised not to see deflation this year.

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Your fear mongering is about 3 months to late. Please keep up. The market believes the feds will raise another 25 bps and the terminal reate will be about 5-5.25%. They will keep them there for the year to fight off inflation and lower rates in 2024 if inflation is sufficentaly depressed.

If that article was on the same topic you might be right.

This thread is about the impact of skyrocketing interest payments on the national debt. Not about the impact of interest rate increases on inflation.
 
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The Fed has signaled it will dial back the rate increases, but is the damage already baked in? Or have they judged it just right?

Many people talk about the rate increases increasing the likelihood and severity of a recession.

Many people also talk about the rate increases creating unemployment.

What few people have talked about much yet is the impact of rising interest rates on the national debt.

The more of the budget you have to spend to cover interest on the debt, the less you have to spend on the normal, already-approved functions of government.

What should we do?

Here are a couple of good links from highly-rated sources and a chart.



how-does-inflation-affect-the-federal-budget-chart-1.jpg



The Conversation​



The Conversation - Least Biased - Credible
Factual Reporting: Very High - Credible - Reliable



Peterson Foundation​



Peterson Foundation - Least Biased - Credible - Reliable
Factual Reporting: High - Credible - Reliable



Actually, it has been talked about quite a bit. I mentioned it a couple times just a couple weeks ago on the debt limit increase debate on this board. It has been discussed numerous times over the years by several posters. This is a major problem as the 10 year treasury is currently at 3.5%. Average interest on the us debt was around 1.4% before last year, which of course accounted for 16-17% of all revenue collected by the US. It doesn't, or at least it shouldn't, take a genius to figure out this isn't sustainable. It is a real problem.

So, what do we do? Simple. Stop borrowing and start paying the debt down.
 
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It has been discussed numerous times over the years by several posters.
True, and I'm one of them. But the conversations never go very far and, in the past, the problem hasn't been as worrying (to me) as it's starting to look today.

Would you be willing to raise revenues to keep from borrowing?
 
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True, and I'm one of them. But the conversations never go very far and, in the past, the problem hasn't been as worrying (to me) as it's starting to look today.

Would you be willing to raise revenues to keep from borrowing?

It is certainly the elephant in the room that no one wants to talk about.

As far as your question. I don't think we have a choice. I am all for an increase in taxes if it is meant for a balanced budget. It flat out has to happen. They cannot keep kicking this can down the road. First, work on a balanced budget, then figure out a plan to where they no longer have to continue renewing the debt. It would be great if we had some grown ups in Washington that could work together to figure this out. we don't.
 
The more of the budget you have to spend to cover interest on the debt, the less you have to spend on the normal, already-approved functions of government.
This assumes that there is an acceptable limit to the amount of debt we can assume,.. Personally I agree with this line of thought, but most Democrats are unhampered by such a restrictive concept.
 
LOW rates are far more dangerous than high rates. Interest rates are about where they need to be now.....This nation needs to discipline itself to restrain spending and raise tax rates (Clinton's plan, perhaps)......Money has to mean something and have value in a capitalistic society.......cheap/free money does capitalism a great disservice.
 
LOW rates are far more dangerous than high rates. Interest rates are about where they need to be now.....This nation needs to discipline itself to restrain spending and raise tax rates (Clinton's plan, perhaps)......Money has to mean something and have value in a capitalistic society.......cheap/free money does capitalism a great disservice.

I agree. Rates are actually at a very healthy spot right now. Even more concerning on the interest payments we are about to start seeing in the coming years.
 
LOW rates are far more dangerous than high rates. Interest rates are about where they need to be now.....This nation needs to discipline itself to restrain spending and raise tax rates (Clinton's plan, perhaps)......Money has to mean something and have value in a capitalistic society.......cheap/free money does capitalism a great disservice.
 
I was promised doom. I’m still sitting here waiting for doom. Oh and ww3, Russia this is getting old fast.
 
LOW rates are far more dangerous than high rates. Interest rates are about where they need to be now.....This nation needs to discipline itself to restrain spending and raise tax rates (Clinton's plan, perhaps)......Money has to mean something and have value in a capitalistic society.......cheap/free money does capitalism a great disservice.
I wonder what the rates would be if they were allowed to float. What's the real free market rate? Does any respectable organization study that?
 
The Fed has signaled it will dial back the rate increases, but is the damage already baked in? Or have they judged it just right?

Many people talk about the rate increases increasing the likelihood and severity of a recession.

Many people also talk about the rate increases creating unemployment.

What few people have talked about much yet is the impact of rising interest rates on the national debt.

The more of the budget you have to spend to cover interest on the debt, the less you have to spend on the normal, already-approved functions of government.

What should we do?

Here are a couple of good links from highly-rated sources and a chart.



how-does-inflation-affect-the-federal-budget-chart-1.jpg



The Conversation​



The Conversation - Least Biased - Credible
Factual Reporting: Very High - Credible - Reliable



Peterson Foundation​



Peterson Foundation - Least Biased - Credible - Reliable
Factual Reporting: High - Credible - Reliable


Rate increases are needed to control inflation.
The rate increases as a percentage y/y are the highest ever. The first causes of inflation post covid was Bidens energy policy and reckless spending.
The fed will be forced to have increases.
Thats what happens when you elect a vegetable.
 
Rate increases are needed to control inflation.
The rate increases as a percentage y/y are the highest ever. The first causes of inflation post covid was Bidens energy policy and reckless spending.
The fed will be forced to have increases.
Thats what happens when you elect a vegetable.
You mean "Junior"? (the reason the rates were lowered originally)...Or Trump (the reason the rates stayed low....after he jawboned and criticized the Fed)?
Dog...the reason rates fell were because of the home mortgage crisis and the collapse of the insurance industry under Junior in 'p06-'08. Let's be honest here....rates have been shockingly low for about 15 years, until rising after Biden took office. I don't disagree that the rates collapsed because a "vegetable" was elected POTUS.....except the vegetable(s) were Junior and the GOP Congress.....
 
Rate increases are needed to control inflation.
The rate increases as a percentage y/y are the highest ever. The first causes of inflation post covid was Bidens energy policy and reckless spending.
The fed will be forced to have increases.
Thats what happens when you elect a vegetable.
I give up on people like you.
 
You mean "Junior"? (the reason the rates were lowered originally)...Or Trump (the reason the rates stayed low....after he jawboned and criticized the Fed)?
Dog...the reason rates fell were because of the home mortgage crisis and the collapse of the insurance industry under Junior in 'p06-'08. Let's be honest here....rates have been shockingly low for about 15 years, until rising after Biden took office. I don't disagree that the rates collapsed because a "vegetable" was elected POTUS.....except the vegetable(s) were Junior and the GOP Congress.....
Wow.
Selective memory.
Anything i wrote wrong?
 
You mean "Junior"? (the reason the rates were lowered originally)...Or Trump (the reason the rates stayed low....after he jawboned and criticized the Fed)?
Dog...the reason rates fell were because of the home mortgage crisis and the collapse of the insurance industry under Junior in 'p06-'08. Let's be honest here....rates have been shockingly low for about 15 years, until rising after Biden took office. I don't disagree that the rates collapsed because a "vegetable" was elected POTUS.....except the vegetable(s) were Junior and the GOP Congress.....
The Fed is run by the president?
 
Rate increases are needed to control inflation.
Why do people believe this?

There are other ways. We just don't have the political will to use them, so we let things go to hell and wait for the Fed to use blunt instruments to save us.

What other ways, you ask?

How about Congress vote to raise the revenues to pay the bills?

How about Congress vote to pay for programs that they start or expand?

How about using price controls or windfall profit taxes to stop or slow inflation?

How about cutting subsidies to industries that clearly don't need them - like the fossil energy sector?

We can also cut waste and corruption, and even cut spending as appropriate.

Those are just the obvious alternatives. And we would still have interest rate controls in the tool box, if we need them.
 
Why do people believe this?

There are other ways. We just don't have the political will to use them, so we let things go to hell and wait for the Fed to use blunt instruments to save us.

What other ways, you ask?

How about Congress vote to raise the revenues to pay the bills?

How about Congress vote to pay for programs that they start or expand?

How about using price controls or windfall profit taxes to stop or slow inflation?

How about cutting subsidies to industries that clearly don't need them - like the fossil energy sector?

We can also cut waste and corruption, and even cut spending as appropriate.

Those are just the obvious alternatives. And we would still have interest rate controls in the tool box, if we need them.
Good luck with this....
 
LOW rates are far more dangerous than high rates. Interest rates are about where they need to be now.....This nation needs to discipline itself to restrain spending and raise tax rates (Clinton's plan, perhaps)......Money has to mean something and have value in a capitalistic society.......cheap/free money does capitalism a great disservice.
I agree. Rates are actually at a very healthy spot right now. Even more concerning on the interest payments we are about to start seeing in the coming years.
I somewhat disagree. Let me explain.

High interest rates make it harder for people to borrow. As you raise rates some people won't expand their business, others won't buy a home or car, and so on.

You know what else makes it harder to borrow? Careful risk assessment.

Personally I'd rather have lower rates, and less permissive lending.

Permissive lending isn't necessarily a bad thing, but we saw how it could go off the rails with the housing bubble. And yet, most believe that will proper regulation of the CDO market, the big bubble and subsequent bust could have been averted.

So the question might be, would you rather have high interest with insufficient regulation - leading to periodic economic crisis and eventual bailout of banks and brokers - or would you rather have more affordable interest with more effective regulation?

This is a tough sell, because ever since Reagan, "regulation" has been wielded as a bad word by the GOP (and not just the GOP).
 
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