Important Takeaways:
- With U.S. debt now at $35.3 trillion, the cost of paying the interest on all that borrowing has soared recently and now averages out to $3 billion a day, according to Apollo chief economist Torsten Sløk.
- And that includes Saturdays and Sundays, he pointed out in a note on Tuesday.
- The daily interest expense has doubled since 2020 and is up from $2 trillion about two years ago. That’s when the Federal Reserve began its campaign of aggressive rate hikes to rein in inflation.
- In the process, that made servicing U.S. debt more costly as Treasury bonds paid out higher yields. But with the Fed now poised to start cutting rates later this month, the reverse can happen.
- “If the Fed cuts interest rates by 1%-point and the entire yield curve declines by 1%-point, then daily interest expenses will decline from $3 billion per day to $2.5 billion per day,” Sløk estimated.
- Meanwhile, the federal government closes out its fiscal year at the end of this month, and the year-to-date cost of paying interest on U.S. debt was already at $1 trillion months ago.
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Important Takeaways:
- America’s gross national debt hit an eye-watering $33 trillion for the first time in September — mere months after eclipsing the $32 trillion mark earlier in the year.
- The U.S. is also currently spending more to pay interest on the national debt than it does on national defense, according to the Treasury’s monthly statement.
- In the current fiscal year through August, the Treasury has shelled out $807.84 billion in interest on its debt securities, while the Department of Defense’s budget for military programs totaled just $695.44 billion in the same period.
- A deficit is what happens when the government spends more money in a fiscal year than it brings in through taxes — and the last few years have been expensive for the U.S.
- Nearly $2 billion is spent every day just in interest on the national debt
- Foreign governments and private investors are one of the biggest holders of the public debt, owning around $8 trillion.
- “With more than $10 trillion of interest costs over the next decade, this compounding fiscal cycle will only continue to do damage to our kids and grandkids.”
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