These facts help explain our problem:
- US government debt stands at $11.89 Trillion
- US government marketable debt stands at $6.948 Trillion
- The US Treasury must sell $205 billion of Treasuries in 2010 just to service the existing debt interest
- By 2019 the debt servicing costs will rise to $700 bn per annum assuming rates do not increase above 3%
- Every 1% rise in interest rates equal an increaseing tax burden on US tax payers of $80 bn to $100 bn. This is more than the combined annual budgets of the US Department of Education and the Department of Energy
- Within 5 years 30% to 50% of US tax payer revenues will be used to service government debt interest
In other words, it’s not just the debt that is a problem, but the growing interest. We have to continue to issue more debt just to pay the interest on our current debt; or continue to raise taxes.
As my buddy Louis just pointed out to me, this effectively means we are paying our taxes (or at least any increases) to China.
Source: CLSA
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