21 Feb 2015

US taxpayers have now paid $9.6 trillion in interest payments on Government debt since 1988

Back in June 2012, I had a post showing that US taxpayers had paid $8.5 trillion in interest payments on goverenment debt since 1988.

I thought it might be amusing to update the figures, using the official US Treasury information that you can find here. I've included the numbers on the US public sector debt too - you can easily download the official numbers for years before 2000, for 2000-2014, and for the latest figures to the nearest cent.

Here are the results.

 As you can see, government debt has continued to soar, and has reached  $18.1 trillion at the end of january 2015. But the remarkable fact is that $9.6 trillion of that (roughly 53%) is entirely due to the interest payments on that debt since 1988 - the US treasury site doesn't provide number before then.

In fiscal year 2014, the total interest payments totalled $431 billion - a number that is second only to the peak value of $454 billion achieved in 2011.

I've also calculated the effective interest rate. That number has effectively been dropping virtually continuously since a peak of 8.43% in 1989, and now stands at 2.42%.

Does that mean that US taxpayers are getting a good deal?

NO WAY! Yes, the markets are charging a lower rate than before, but they don't have to charge much when the Debt level is so high. $430 trillion is still 2.43% of the US GDP for 2014 (it was $17.7 trillion). That fits with the general rule of thumb that Banks will typically adjust their interest rates to try and suck money out of taxpayers' pockets at an optimal rate of not more than about 3% of GDP. If they tried siphoning off more money, taxpayers might notice what was going on.

And remember that Banks can lend the US government non-existant money and still charge interest. It's a truly amazing arrangement that is a fantastic deal - for the Banks who have the monopoly on money creation.

As I have pointed out, since the US government's credit rating is AAA (according to the rating agency Fitch), the Basel Banking regulations mean that such loans have a 0% risk weighting.  And that means that Banks don't even have to have any capital at all to make loans. They can create infinite quantities of "money" to lend to the US government, who will then happily pay out $430 billion in interest using tax payers money.

Remember, that there is no reason why the US government could not create the nation's money supply itself. 

If anyone can explain why this insane system is allowed to continue, do let me know.

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