Tuesday, January 13, 2009

The Federal debt is relevant

There is a tremendous amount of interest lately in the Federal debt,roughly $10.7 trillion to date.I have read many opinions that we should not worry about it.Every time we attempt to pay it down,inflation leads to a recession and it fails.Some disregard the argument that we are leaving this debt to our children using the logic that they will just do what we do and keep passing it on.Some say as a percentage of our GDP,it's still quite low relatively speaking and not harmful to the economy.Some say write it off.Some say China is now losing interest in buying debt because of economic problems at home.Some say who cares,the Fed will just keep buying the debt and in essence print money.

It's tough to wrap your arms around a problem you can't comprehend and doesn't seem to affect your daily life.But it really does affect you because of the drag of the monthly interest the Treasury pays.When the various Treasury securities come due,they are exchanged for new ones with different interest rates assuming the holders don't just cash out.This is why the interest rates vary so much.It's dependent on the interest rates tied to the securities being traded for the new rates and we pay the difference out of the general fund.That's real money even if the trading of the securities is just paper.

I studied the numbers from the Treasury dept. and just since 1988 thru 2008,we paid out $6,989,635,034,714.74 trillion dollars in interest,about $325 billion per year.Already in the 1st quarter of 2009,we paid out $134 billion.This just the last 20 years.We've been running a Federal debt since 1789.Granted,the numbers were minuscule for the majority of the last 230 years and this why I would weight recent years as relevant.The point is the trillions of dollars spent of taxpayer dollars for interest only.What could we have done with all that money?We could re-pave and rename every road in America Obama Avenue.Or give members of Congress a much deserved pay raise.Seriously,maybe we could have invested it in securing our liberty and promising a better future to our youth.More to come...

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