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RE: Huh? Are you assuming we keep borrowing huge sums when interest rates go up?

Posted by Rod M (W) on June 9, 2021 at 19:34:00

In Reply to: Huh? Are you assuming we keep borrowing huge sums when interest rates go up? posted by Rick W on June 9, 2021 at 13:27:02:

The GDP has about doubled since 2000; however, this chart show it in todays dollars, so you get 2% inflation and about 2% growth. Considering just real growth of 2%, GDP grew from $10.3T to $15.6T over 20 years.

I realize that T-Bills mature at different times. Some mature tomorrow and the latest in 10 years though a lot of people are buying shorter term bonds. In any case, new debt will pay the new rate and likely, around 5 years out, most bonds will get adjusted to new rates. At some point, historical interest rates will come back at typically 4%. Since 2010, the debt gone from $13,562 to to 28,234, more than double. At 4%, it's $1.13 trillion if we stop borrowing. If we double the debt again in 10 years, that total is $2.26T per year. Our current budget was about $4.7T.

If we do 2% a year, GDP would be maybe $26T in ten years with the debt at $56T if the current pattern continues. Do the math and pray we don't see 70s inflation.




-Rod

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