Will U.S. National Debt service costs mean high deficits and a devalued dollar?
*The New York Times, by Edmund L. Andrews, November 22, 2009:
''Wave of Debt Payments Facing U.S. Government
The United States government is financing its more than
trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too
good to be true.
But that happy situation, aided by ultralow interest rates, may not
last much longer.
Treasury officials now face a trifecta of headaches: a mountain of new
debt, a balloon of short-term borrowings that come due in the months
ahead, and interest rates that are sure to climb back to normal as soon
as the Federal Reserve decides that the emergency has passed.
Even as Treasury officials are racing to lock in today’s low rates by
exchanging short-term borrowings for long-term bonds, the government
faces a payment shock similar to those that sent legions of
overstretched homeowners into default on their mortgages.
With the national debt now topping $12 trillion, the White House
estimates that the government’s tab for servicing the debt will exceed
$700 billion a year in 2019, up from $202 billion this year, even if
annual budget deficits shrink drastically. Other forecasters say the
figure could be much higher.
In concrete terms, an additional $500 billion a year in interest
expense would total more than the combined federal budgets this year
for education, energy, homeland security and the wars in Iraq and
Afghanistan.
The potential for rapidly escalating interest payouts is just one of
the wrenching challenges facing the United States after decades of
living beyond its means.''
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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