Uncle Sam is getting squeezed by higher borrowing costs of $31 trillion too. Not just the ordinary folks on their home mortgage payment and small business owners on their borrowings.
• In 2022
According to CNN, fiscal 2022 alone, the federal government made $475 billion in net interest payments, up from $352 billion the prior year.
For context, that’s more than the government spent on veterans’ benefits and transportation – combined. And it’s nearly as much as the $677 billion spent on education.
• By 2025 or 2026
Federal interest payments could exceed the country’s entire defense budget, according to Moody’s Analytics. For context, defense spending stood at $767 billion in fiscal 2022.
• Conclusion
This time compared to 2008 is different. Then inflation at its highest was at 5.5%, today its highest inflation number is yet to be known at 9%. The Fed has little option to keep interest low.
“Regardless of who wins the midterms or in 2024, there are really difficult decisions that will have to be made. This is really going to handcuff them,” said Moody’s Analytics.
The real danger will be with the continuous rise in interest rates and yet the dollar starts weakening, just like the pound. Not happening now, I am keeping watch on this closely. However, it is not all bad news, we can still hedge…
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