Debt Service

Well golly gee – you mean all that debt – almost $5 trillion from George and then, by the time he moves on, about $9 trillion from Barry – you mean we have to service that $14 trillion of debt?  Golly gee – what is that going to cost us?

Well, no one asked Ben Bernanke  – George and Barry’s financier, did they?  At least we haven’t heard Ben tell us what it is costing now and will cost in the future – we have a pretty good idea that it is not all locked up in 30 year fixed rate mortgage bonds like your home mortgage may be.  So what does all this mean?

Well, here is a brief look at debt service – maybe someone in the Hollywood media will read this posting and will ask Barry or Ben or someone a question about it the next time they get a chance:

Today, the federal government owes $17 trillion.  If that were a 30 year mortgage, say payable at 3.5%, the monthly payment would be - $7,634,000,000.00 which in English is 7 billion, 634 million each month or $91,605,000,000.00 per year which in English is 96 billion, 605 million annually.  Over 30 years, after making payments of $27,482,000,000,000.00 the debt would be paid off – or in English, 27 trillion, 482 billion dollars to pay back the 17 trillion we now owe.

(Aside and rather unpleasant reminder – this is what they tell us they owe – we think we probably owe a whole heck of a lot more but then again, following the logic of the Democrats likely 2016 presidential candidate, “What difference does it make?”)

Now, one other unpleasant reminder – we don’t have a $17 trillion, 30 year mortgage at 3.5% - but we probably should.  So, let’s say we end up paying all that back at 4.5% (we should  be so lucky) then what would the total payment be, after 30 years?

$31,010,000,000,000.00

Say 5.5% (all of these rates for 30 year bonds are way below recent historic rates for 30 year bonds):  $34,749,000,000,000.00.

Yep at 5.5% the cost to service and repay the current 17 trillion they tell us we owe is double what we presently owe.  Such a deal, huh?

Paul Krugman (60), Alan Greenspan (87), Ben Bernanke (59), even the brilliant and greatly missed, Larry Summers (58) – we never hear them talk about paying back $27 trillion or $31 trillion or – eeks, $34 trillion.  Maybe 60 year old guys (and one 87 year old) don't worry so much about such things, huh?  Maybe they too subscribe to Hillary's self introspection philosophy:  what difference does it make?

Convenient of them isn’t it.  We wonder if the bond market views things equally conveniently?  Can you imagine a day when a US treasury bond is viewed with the same level of attractiveness as a city of Detroit bond?  How many city of Detroit bonds do you think the four wise men above (and Hillary) own?

Debt service – one of those inconvenient truths – the kind that the Clinton’s and Bush’s and Obama’s seem to think don’t make much of a difference.  They sure are experts on all those really important issues though - you know, homosexual marriage and affirmative action and Obamacare and China's currency manipulations (talk about the pot calling the kettle black) and peace in the middle east.