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The U.S. Government’s balance sheet is one step closer to blowing up as
its debt, and interest expense hit new record highs. And when I say
“new record highs,” I am not exaggerating. It’s been a while since I
checked the data on the TreasuryDirect.gov website, but when I researched the
figures for this article, I was quite surprised by just how quickly the
numbers are rising.
Thus, it’s also no wonder the stock markets continue to grind higher and
higher because, without the U.S. Government’s unlimited check-writing
ability, the markets would have collapsed years ago. So, to all the
Keynesian wanna-be’s who believe the Central Banks can print our way to
prosperity forever, please tap your shoes together three times and say,
“Everything will be okay because I have my 401k.”
Let’s get started with the tremendous surge in the U.S. Government
interest expense. Well, it seems as if things are really
starting to get crazy at the U.S. Treasury when its interest expense in July
jumped by a whopping 41% year-over-year. That’s correct.
The U.S. Government paid $40.5 billion in interest expense this July versus
$28.7 billion for the same month last year. That is one heck of an
increase.
If we look at the following two tables, we can see that the percentage
increase of the interest expense in July is much higher than the previous
months:
The interest expense the U.S. Government paid in Apil, May, and June was
up 22%, 28%, and 6% respectively versus the same months in 2017.
However, July was up 41% compared to July last year. Furthermore, total
U.S. interest expense in 2017 was $458 billion while the amount paid this
year is $455 billion and we still have two months remaining.
The U.S. Government paid $54 billion to service its debt in the last two
months of the fiscal year last year. So, if we assume a 20%
increase of that figure, the U.S. Treasury will have to fork out another $65
billion for August and September for a total of $520 billion in 2018.
And, the reasons for the rapidly rising interest expense are the
ballooning debt and higher interest rate. We can see this quite clearly
in the following chart:
Total U.S. public debt shot up to $21.3 trillion in July versus $19.8
trillion during the same period last year. While the public debt
increased 8% during this period, as I mentioned above, the interest expense
surged by 41%. So, the rapidly rising cost to service the U.S. debt
will become an ever-increasing burden for the accountants at the U.S.
Treasury and Federal Reserve.
Now, the chart above only shows the U.S. public debt as of July
31st. Here is a table from the TreasuryDirect.gov website showing the
increase in debt for August and a few days in September:
In just a little more than a month, Uncle Sam added another $200
billion to the public coffers. At that pace, it would be over
$2 trillion a year… LOL. Unfortunately, we Americans have become numb
to this sort of financial insanity. Thus, trying to be frugal or smart
about spending money in a land of Spend-Thrifts and Credit-Card Junkies,
makes one seem like a real oddball. I know, I am one of them.
While I can go out and buy a new car, I rather drive my old beat-up Ford
pickup truck. When I drive down the highway during the weekend and see
a family in a large $60,000 four-wheel drive pickup truck, pulling a $40,000
RV with a trailer behind it holding two ATV’s at $10,000 a pop, I wonder how
many paid cash for that??? Of course, it’s likely a fraction. Everyone
is up to their eyeballs with payment plans and debt.
After all… this is the American way.
So… the fun everyone is enjoying on borrowed money will likely go on a bit
longer. Yes, it’s hard to predict when the music stops. But, when
it does, there may only be 1 chair for every 50 Americans. As
comedian George Carlin would say… “THIS IS WHEN THE REAL FUN BEGINS.”
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