Loading ...If interest rates went up
I read the following in an article…
- In 1979, at the height of the last 40year stagflation cycle, 15% rates meant the government’s interest payments on its debt (of about $800 billion) were $120 billion, or approximately 25% of its annual revenues.
- Today, 15% rates on its $40 trillion of debt would be $6 trillion, more than the roughly $5 trillion in annual revenues… which is more than 100% of those revenues.
I built a table to visualize it. This is very scary should rates ever get out of hand.
I added an excel file so that you can see the table better.
|
1980
|
2026
|
Increase
|
2026
|
Increase
|
|
|
Govt Debt
|
800 billion
|
40 trillion
|
500%
|
40 trillion
|
500%
|
|
Interest rate
|
15%
|
3.0%
|
-80%
|
15% *
|
* hypothetical
|
|
Interest payments
|
120 billion
|
1.2 trillion
|
1000%
|
6 trillion
|
5000%
|
|
Govt Tax reciepts
|
500 billion
|
5 trillion
|
1000%
|
5 trillion
|
1000%
|
|
Percentage of Int Payments
|
24%
|
24%
|
no change
|
120%
|
500%
|
If AI takes out people in higher income jobs (which its doing), then unemployment goes up and tax receipts fall.
Then the budget deficit expands (further), forcing rates up as bond issuance must rise.
Buying bonds from an already bankrupt entity seems foolish…….
Good point.
AI is an accelerator