August 22, 2013

“Economic Statistics for 21 Aug 13…and Commentary”

Dale Franks breaks down the numbers:

One might […] remark that rising mortgage rates may signal the inevitability of rising interest rates for Treasury bonds. Or, perhaps, vice versa. Whatever.

Either way, you should keep in mind that a rise of 1% in Treasury yields works out to an additional $160 billion or so in debt service payments per year. Right now we’re paying about $350 billion a year on debt service, with a low net interest rate a bit above 2%.

If the net interest rate goes back to the historical rate of 6%, we’re looking at interest payments of $950 billion or so per year. Keep in mind that the Federal government already isn’t taking in enough revenue to cover payments for Social Security, Medicare, and Debt Service. That means that we’re borrowing money to cover part of our debt service, and everything else the federal government does. There’s no way we can afford to pay $950 billion a year in interest payments.

And we certainly can’t borrow an additional $600 billion per year to pay for the additional interest payments. That would quickly result in a debt death spiral. But we could eliminate every single executive department -– including Defense -– and we’d still have a $1 trillion deficit.

— All true. And all terrifying. Concludes Franks,

You should be happy the economy is moribund, because that’s keeping interest rates low, and low interest rates are preventing the aforementioned fiscal death spiral right now.

Also true, but to me, a bit too fatalistic.

Because while I take Dale’s point as a matter of current economic situatedness, his conclusion is a lot like arguing that you should be happy your wife is a homely, well-stretched skank. If only because it’s precisely that repulsiveness that is keeping your friends and her co-workers, no matter drunk they get, from having a go at the wanton little slut.

Best to stop the rationalizing and just either divorce the whore or kill her off by slowly and carefully by poisoning her morning Cinnamon buns with trace amounts of arsenic.

If you’ll allow the metaphor.

(h/t Physics Geek)

Posted by Jeff G. @ 12:26pm

Comments (14)

  1. The Fed has been suppressing interest rate hikes for years for this very reason.

    The advantages (cheap loans) are always touted; the disadvantages (terrible returns on the more “safe” investments promoting riskier strategies, and a huge disincentive to save money) seldom get much mention by politicians and pundits.

  2. Embodying the primary leftists’ maxim: A dead people is a quiescent people — and vice versa, as the situation may indicate.

  3. If we can manage to have “stagflation”, stagnant economy and high interest rate and high inflation, then why can’t we manage the opposite of a growing economy and low interest rates?

    Anyway if the economy gets to really takeoff, which will require lessening the tax and regulatory burden of the government, then tax revenue, as opposed to tax rates, will increase and government outlays decrease, which will lead to a balance or even a surplus which can/could then be used to pay down the debt.

    I don’t know how this relates to the metaphor. Maybe plastic surgery for you both so she’s lovely and is in love with your handsome self too.

  4. Which is why, tin-foil hats notwithstanding, one needs to prepare for the inevitable meltdown.

  5. The bright side is that they are creating a vacuum of true power, which ain’t all that bright, really, cause there’s no clear takers for it.

  6. Given those awful statistics, I’d go with this video, di.

  7. there should be an option where you kill the whore really fast to where you have time to stash the body plus watch tv before bed

  8. Thanks for the hat tip. I was thoroughly depressed after reading it and decided to share my fatalism. Apparently, it’s catching, much like herpes. Unlike herpes, this shit will follow you after death.

  9. Ferguson doubts we can grow our way out of our present predicament.

    Because the debt burden lowers growth only when it rises above the 90 per cent of GDP threshold, the habit of running deficits gets well established before it becomes deleterious. This … poses a … problem for those Keynesian economists who believe that the correct response to a reduction in aggregate demand via private deleveraging is for the already indebted public sector to borrow even more. It also casts doubt on the validity of the claim that low interest rates on US Treasuries are a market signal that teh government can and should issue more debt.
    Equally remote is the prospect that a technological breakthough … could provide .. a ‘get out of jail’ card. The harsh reality is that from the vantage point of 2012, the next twenty five year … are highly unlikely to see more dramatic changes than science and technology produced in the last twenty-five.

  10. ye who enter here

    c’mon you know the drill

  11. Equally remote is the prospect that a technological breakthough … could provide .. a ‘get out of jail’ card. The harsh reality is that from the vantage point of 2012, the next twenty five year … are highly unlikely to see more dramatic changes than science and technology produced in the last twenty-five. – See more at:

    I’d argue that point, but Friedman tells us that todays situation is a huge disincentive to innovate.

  12. August 22nd was the day that NPR told me that the employment situation had finally returned to normalcy; that the number of people applying for unemployment insurance had finally returned to the level of churn that it had back in, say, 2007.

    The amount of hand-waving that surrounded that proud announcement should have permitted the speaker to hover a few feet off the pavement.

  13. I think the point is debatable as well Mueller, but not without some merit. Ferguson goes on the make a kind of diminishing returns or slowing pace of innovation argument. The 25 year period from ’86-2012 saw the digital revolution, and beginings of bio-genetics (my phrase), the 25 years before (’61-86) was the space age the 25 before that (’35-’60) (and I guess the 25 before that too, 1910-34) was the time when we were inventing those things that the baby boomers complained to that old fogey Reagan didn’t exist when he was their age, so how could he possibly understand the Age of Aquarius.

    Writes Ferguson, “[i]n the words of Peter Thiel, perhaps the lone skeptic within a hundred miles of Palo Alto, ‘We wanted flying cars, instead we got 140 characters.'”