Thanks Barack Obama Soetoro Soebarka: It Is Now Mathematically Impossible To Pay Off All Of Our Debt

[Skylar]

If interest rates rise, that is a sign of inflation. During periods of inflation the Fed sells its assets to soak up excess liquidity. If the Fed attempts to sell 2.75% bonds in a market where the rates have risen above that, they have to sell them at a loss.

We're talking past each other, describing the same thing. My point isn't in regard to new debt. Its in reference to old debt.

Lets say that in 2010 the Fed sold a 30 year bond with a yield of 2.5%. If, in 2016 interest rates rose sufficiently, a 30 year bond being sold in 2016 would have to have an interest rate of 5%.

However.......the 2010 bond, which will be making yearly interest payments for 30 years before principle is returned, will still be paying only 2.5%. The Fed isn't selling that 2010 bond again. They sold it in 2010. Future increases in interest rates only affect new debt. Not securities that have already been sold.

 

[g5000]

Assets can be used to pay debt. You sound as foolish as the person who wrote the OP article.

Not at all. You SELL assets to pay off debt, with cash. You're probably new to the whole concept of investing, but people invest to make money. An asset is merely a tool to accomplish that.

You are making more and more a fool of yourself. $83 trillion of wealth means it is not mathematically impossible to pay off the debt. Even a retard should see that.

That $83 trillion in net worth you are referring to is owned by the private sector. The public sector needs to repay the private sector, not the other way around...

If the US government decides to nationalize everything or create a wealth tax, your claims may be possible. Although, that is not how things work in the real world.

I am merely pointing out the OP article writer is an idiot. He said if we confiscated all wealth, there isn't enough to pay off the debt. He was WAAAAAAAAY off. That's a fact.

The OP article publisher wrote, "if you took every single penny away from everyone in the United States that it still would not be enough to pay off the national debt."

If you look at household balance sheet statistics, which contains that $83 Trillion wealth figure you love to use so much, you would see that this claim is true. It would pay down the debt significantly, but it wouldn't pay it off...

He is working from a false premise that debt could only be paid off with cash on hand.

 

[Hedgology]

The debt doesn't really need to be paid off, or down some. It just needs to be shown that it can be serviced.

Right now, with interest rates at historic lows for the historic length of duration, paying interests and principle on the debt is doable. However, interest rates can't stay where they are for very long without adverse consequences. When rates rise, paying down, off or some of the debt will be mathematically impossible.

T-bills aren't adjustable rate. They are fixed rate. Whatever rate they were lent is what is owed. So take a 30 year treasury bond at 2.75%. That's 27.50 in interest for every $1000 of the bond. If intererest rates skyrocket, that bond is still 27.50 every year for $1000 of the bond. And it will remain exactly that for the life of the bond.

So the higher intertest rates bonds only count for newly issued bonds. Not for those that have already been issued. The 'mathematically impossible' bonds would be at a higher interest rate for a maximum of 30 years. Then they'd be reset at whatever the rate was when the principle came due and the bond is reissued.

Everyday at least 60 million of debt comes due and most treasuries mature anywhere from 15 weeks to 3 years. Raising interest rates affects these T-Bills greatly.

Then falling interest rates would effect them just as fully. Interest rates rise and fall. So any argument about our debt becoming 'mathematically impossible' if interest rates were higher would be a temporary situation. As we'd be able take advantage of lower interest rates very quickly.

There is very little that can be done to effect the yield curve of existing maturities, so even lower rates would be a stretch. There isn't much of a direction yields can maneuver in except up. When interest rates rise, yields will rise with them. It will only be a temporary situation if the Fed decides to undo their rate hikes. If anything, we should be taking advantage of lower interest rates while they are still low.

'A' rise won't result in our debt becoming 'mathematically impossible to service'. It would have to be a pretty enormous rise for that threshold to be reached. And there's be plenty of maneuvering room for rate drops anywhere close to that level.

If the fed funds rate were to return to 3.5%, the 10 year would need to return to 4.7% and the 3 month would return to 3.5%. This would double our interest payments, and also make it impossible to service, considering the increase would have just as negative impact on the economy as leaving it as zero.

 

[Hedgology]

Not at all. You SELL assets to pay off debt, with cash. You're probably new to the whole concept of investing, but people invest to make money. An asset is merely a tool to accomplish that.

You are making more and more a fool of yourself. $83 trillion of wealth means it is not mathematically impossible to pay off the debt. Even a retard should see that.

That $83 trillion in net worth you are referring to is owned by the private sector. The public sector needs to repay the private sector, not the other way around...

If the US government decides to nationalize everything or create a wealth tax, your claims may be possible. Although, that is not how things work in the real world.

I am merely pointing out the OP article writer is an idiot. He said if we confiscated all wealth, there isn't enough to pay off the debt. He was WAAAAAAAAY off. That's a fact.

The OP article publisher wrote, "if you took every single penny away from everyone in the United States that it still would not be enough to pay off the national debt."

If you look at household balance sheet statistics, which contains that $83 Trillion wealth figure you love to use so much, you would see that this claim is true. It would pay down the debt significantly, but it wouldn't pay it off...

He is working from a false premise that debt could only be paid off with cash on hand.

You're welcome to show me a bond investor who accepts equities or open market paper instead of cash redemptions as payment.

Aside from that, all repayments are in cash. Always have been.

 

[Skylar]

If the fed funds rate were to return to 3.5%, the 10 year would need to return to 4.7% and the 3 month would return to 3.5%. This would double our interest payments, and also make it impossible to service, considering the increase would have just as negative impact on the economy as leaving it as zero.

The Fed Funds rate is only vaguely related to the 10 year yield. For example, our current fed funds rate is essentially 0. Yet the 10 year Treasury Notes interest rates are around 2.2%. At the end of 2013, it was also essentially 0. And interest rates on the 10 year treasury note shot up to 3%. In January of this year, the fed funds rate was essentially 0. And the 10 year treasury note was 1.7.

A vacillation of nearly double....on the exact same fed funds rate.

And when the Fed funds rate was at 4%, as it was in December 2007, the 10 year Tnote yield was only a quarter percent higher. Yet in december of 2009 when the Fed Funds rate as at essentially 0 (0.12%), the 10 year Tnote yield was at 3.85.

Barely a half point tick downward in the yield despite the fed funds rate dropping almost 8 times more.

When the fed funds rate is higher, the 10 year Tnote is generally slightly lower. From 2006 to 2008 the Fed Funds rate hovered at or very near 5%. While the 10 year Tnote yield hovered closer 4.5, dropping as low at 4 (twice) and climbiung as high as 5 (twice).

So your estimates of the Tnote needing to be a clean 1.2% higher than the fed funds rate is just not supported by the historical evidence. At least not in the last 10 years.

 

[Spare_change]

The founders warned about installing a non-natural born citizen as president with allegiance problems to the United States. It happened through low information voters and fraud and now we are paying the ultimate price for it financially. Barack Hussein Obama Soetoro Soebarka put the nations hopes of ever getting out of debt in the toilet, a place where that boy belongs.

It Is Mathematically Impossible To Pay Off All Of Our Debt Zero Hedge

Haven't you figured it out? They don't care ....

 

[Hedgology]

If the fed funds rate were to return to 3.5%, the 10 year would need to return to 4.7% and the 3 month would return to 3.5%. This would double our interest payments, and also make it impossible to service, considering the increase would have just as negative impact on the economy as leaving it as zero.

The Fed Funds rate is only vaguely related to the 10 year yield. For example, our current fed funds rate is essentially 0. Yet the 10 year Treasury Notes interest rates are around 2.2%. At the end of 2013, it was also essentially 0. And interest rates on the 10 year treasury note shot up to 3%. In January of this year, the fed funds rate was essentially 0. And the 10 year treasury note was 1.7.

A vacillation of nearly double....on the exact same fed funds rate.

And when the Fed funds rate was at 4%, as it was in December 2007, the 10 year Tnote yield was only a quarter percent higher. Yet in december of 2009 when the Fed Funds rate as at essentially 0 (0.12%), the 10 year Tnote yield was at 3.85.

Barely a half point tick downward in the yield despite the fed funds rate dropping almost 8 times more.

When the fed funds rate is higher, the 10 year Tnote is generally slightly lower. From 2006 to 2008 the Fed Funds rate hovered at or very near 5%. While the 10 year Tnote yield hovered closer 4.5, dropping as low at 4 (twice) and climbiung as high as 5 (twice).

So your estimates of the Tnote needing to be a clean 1.2% higher than the fed funds rate is just not supported by the historical evidence. At least not in the last 10 years.

Very bad examples, for a number of reasons. Especially on your first point in explaining the relationship between yields and zero lower bound. Bond yields were never constrained by zero lower bound like the shorter term 1 and 2 year treasuries. Longer term yields on the other hand, have extreme sensitivities to increases in the Fed Funds Rate. The Federal Reserve Bank of San Fransisco has already explained why pretty well.

Also, your time period covers 10 years we've had interest rates near record lows at a constant floating rates, which means rates hold steady for a very long period of time (more than 2 financial quarters or more). The scenario I discussed requires interest rates to be free flowing (or increasing). This is what interest rates do during normal times, not the time frame you have used. The time frame you've used is not even a good explanation of interest rates and yields.

To understand how yields work, you need to understand some basic facts: 1) the short term interest rates are influenced by central banks however 2) long term interest rates are influenced by supply and demand.

T-Bills and notes are more predictably influenced by the fed funds rate than bonds because the fed funds rate and bonds are competing investments in the money market. Bonds, on the other hand, are less influenced because of their longer maturities, which means more can happen within a lifetime. This means bonds have the potential to undergo huge price changes, which is what happens when yields rise, which will occur when the fed funds rate rises.

Fed funds rate drops when the Fed purchase assets (or bonds) in the open market, and the Fed is still one of the largest net acquirers of US Treasuries. Bond yields are highly sensitive to supply and demand, which depends on whether or not the Treasury is issuing fewer bills than investors want. If the Fed were to decide in the recent future to increase interest rates, this would require the Fed to sell treasuries instead of purchasing them. Selling more bonds puts more assets into the open market, decreasing their price, and increasing yields. That's really basic.

In fact, you can probably see that relationship if you realistically look further than the past 10 years.

As you can see, interest rates and 10 treasury yelds are more likely to in tandem than not. There are a few exceptions. The past 10 years being one of them.

Also, the spread between the 10 year treasuring and the fed funds rate has always been higher than 1.2% under normal circumstances, so I don't understand what you are talking about on your last sentence.

 

[Political Junky]

Jeb just said his brother spent too much. Did you miss that?

 

[JakeStarkey]

Steve, you are the one who has to pove it, because it is your claim.

 

[Steve_McGarrett]

Steve, you are the one who has to pove it, because it is your claim.

I didn't write the article.

 

[sealybobo]

The founders warned about installing a non-natural born citizen as president with allegiance problems to the United States. It happened through low information voters and fraud and now we are paying the ultimate price for it financially. Barack Hussein Obama Soetoro Soebarka put the nations hopes of ever getting out of debt in the toilet, a place where that boy belongs.

It Is Mathematically Impossible To Pay Off All reserves away from the private banOf Our Debt Zero Hedge

Then take the federal reserves away from the private bankers. Why did we give it to them in 1913? Its all a scam and no one realizes it. 2007 bank bailout? Are we really this stupid? And we have this conversation every president. Sick of it.

 

[JakeStarkey]

Steve, you are the one who has to pove it, because it is your claim.

I didn't write the article.

Do you back it?

 

[Steve_McGarrett]

The founders warned about installing a non-natural born citizen as president with allegiance problems to the United States. It happened through low information voters and fraud and now we are paying the ultimate price for it financially. Barack Hussein Obama Soetoro Soebarka put the nations hopes of ever getting out of debt in the toilet, a place where that boy belongs.

It Is Mathematically Impossible To Pay Off All reserves away from the private banOf Our Debt Zero Hedge

Then take the federal reserves away from the private bankers. Why did we give it to them in 1913?

Because the Jews got a hold of our politicians.

 

[JakeStarkey]

The founders warned about installing a non-natural born citizen as president with allegiance problems to the United States. It happened through low information voters and fraud and now we are paying the ultimate price for it financially. Barack Hussein Obama Soetoro Soebarka put the nations hopes of ever getting out of debt in the toilet, a place where that boy belongs.

It Is Mathematically Impossible To Pay Off All reserves away from the private banOf Our Debt Zero Hedge

Then take the federal reserves away from the private bankers. Why did we give it to them in 1913?

Because the Jews got a hold of our politicians.

Sigh.

 

[HenryBHough]

Paying it is easy. Argentina does it all the time.

Just these few steps:

1. Repudiate the currency.

2. Introduce the "new dollar"

3. Set the value of the new dollar at $100,000,000,000,000 old dollars.

4. Print three new dollar demonited notes (with a laughing image of Emeperor Obama).

5. Hand 'em out like jelly besns and tell the creditors to keep the change.

Trust me, that IS how it's gonna happen.

When?

When He figures you're fool enough to fall for. Hell, most Democrats are alre ady there...He just needs a few more "moderates" to sucker up.

So what in hell r u waiting 4?

 

[Siete]

our debt is the sum total of every President's deficits.

so McGoober thanks Obama.

I'd like to thank all RW dolts for their stupidity and their service. Someone has to sweep the floor ..

 

[HenryBHough]

so McGoober thanks Obama.

I'd like to thank all RW dolts for their stupidity and their service. Someone has to sweep the floor ..

Hey, you just identified a job Obama might be competent to handle come 2017!

 

[NYcarbineer]

The founders warned about installing a non-natural born citizen as president with allegiance problems to the United States. It happened through low information voters and fraud and now we are paying the ultimate price for it financially. Barack Hussein Obama Soetoro Soebarka put the nations hopes of ever getting out of debt in the toilet, a place where that boy belongs.

It Is Mathematically Impossible To Pay Off All Of Our Debt Zero Hedge

That article is such a load of nonsense.

 

[Nutz]

so McGoober thanks Obama.

I'd like to thank all RW dolts for their stupidity and their service. Someone has to sweep the floor ..

Hey, you just identified a job Obama might be competent to handle come 2017!

WTF...That s not my quote. It amazes me what you fucking teapers will do.

I haven't even posted in this thread. Oh well...as per usual, teaper can do as they please.

 

[IlarMeilyr]

The founders warned about installing a non-natural born citizen as president with allegiance problems to the United States. It happened through low information voters and fraud and now we are paying the ultimate price for it financially. Barack Hussein Obama Soetoro Soebarka put the nations hopes of ever getting out of debt in the toilet, a place where that boy belongs.

It Is Mathematically Impossible To Pay Off All Of Our Debt Zero Hedge

"NOW?"

Stevie, you douche bag, you are not just a dumb ass racist pig dog piece of shit, but you are also piss-poor in history and math.