The treasury curve is flat, ten minus one is about 1%. That means the one year can be rolled over once and earns the ten year rate. So Ned has no more short end debt he wants to issue and is eager to dump new debt at the ten year mark. Once the debt limit hits, the ten year will settle at 2.4-2.5%. That is a 15% expected rise in interest charges that have to be budgeted. All the other programs are slated for 5-10% increases, they lose out.
The debt limit is not an accounting trick.
Ned has to scrounge around and look for pools of money, and the order in which he does that gets noted. Trump has to read the memo on pay out priority which has interest charges paid first. A temporary shut down is practice for a full default. Departments which suspect a shutdown slow their hiring.
In monetary system the ledger is a bit more important than we first realize. The block chain vote on Aug 1 is like the debt limit vote coming a few weeks later. Central bankers should watch their interplay. What if bitcoin comes through with flying colors and the Swamp goes full bzonkers with debt spending? Branded sidechains everywhere and bankers huddling about bankers' coin.
As a percent of the federal budget
Interest payments are about 8% or 20% depending on whether we include the liabilities of the SS trust fund. I include it, as does FRED, mainly because boomers are retiring, the trust fund is the law which hasn't changed. And we see sudden volatility in interest payments as the Swamp discovers the number of new retirees.
So, the unexpected volatility in interest payments are larger than most of the smaller discretionary spending bills, the life blood of small states. It has become obvious to small state senators that increasing interest charges are death knell for their programs. They are better off with forced sequester.
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