We got a heads up from our Twitter friends Seth Dillon and @wallstreetsilv that the United States is careening toward a fiscal disaster, and practically no one in Congress is paying any attention.
Moody’s on Friday changed its outlook on the US credit rating to “negative” from “stable” citing large fiscal deficits and a decline in debt affordability, reported the New York Post.
“Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” Moody’s said in a statement.
Recently, the US government tried to borrow $24 billion by selling a bunch of 30-year debt.
It was a huge disaster. To get enough people to buy, the rate had to dramatically increase. Even then, primary dealers had to buy 25% of the debt. The primary dealers are the buyers of last resort who must buy.
China, Japan, Saudi Arabia, Russia ... none of them are buying our debt. In fact, most are selling what they already have.
Yet, with few buying, the US government is borrowing more than ever.
The Biden administration has borrowed $1.5 trillion in the past four months, and they announced another $1.5 trillion in the next 6 months. The US government will have to offer higher and higher rates to attract lenders.
Annualized interest payments on US government debt have exceeded $1 trillion, a figure that has doubled in the past 19 months. Estimated annualized interest payments on the US government debt pile climbed past $1 trillion at the end of last month, Bloomberg analysis shows. That projected amount has doubled in the past 19 months from the equivalent figure forecast around the time.
The estimated interest expense is calculated using US Treasury data which state the government’s monthly outstanding debt balances and the average interest it pays.
Of course, the gauge of estimated interest costs is different than what the Treasury actually paid. Interest costs in the fiscal year that ended Sept. 30 ultimately totaled $879.3 billion, up from $717.6 billion the previous year and about 14% of total federal outlays.
Bloomberg reports that looking forward, the rise in yields on long-term Treasuries in recent months suggests the government will continue to face an escalating interest bill.
The worsening metrics may reignite debate about the US fiscal path amid heavy borrowing from Washington. That dynamic has already helped drive up bond yields, threatened the return of the so-called bond vigilantes and led Fitch Ratings to downgrade US government debt in August.
“There will be further increases to Treasury coupon auctions and T-bills outstanding going forward,” Bloomberg Intelligence strategists Ira Jersey and Will Hoffman wrote in a research note. “Besides deficits of over $2 trillion in the foreseeable future, climbing maturities following the increase of issuance from March 2020 will also need to be refinanced.”
By the way, Moody’s is the last of the three major rating agencies to maintain a top rating for the US government. Fitch changed its rating from triple-A to AA+ in August joining S&P, which has an AA+ rating since 2011!
The U.S. public debt is now almost 120% of Gross Domestic Product (GDP). The Capitol Switchboard is (202-224-3121), call today and tell your Representative and Senators you want them to rein-in federal spending before it cripples our economy and our national security. Tell them over $1 trillion in interest every six months is unacceptable.
P.S. The Center Square Voters' Voice Poll, conducted in conjunction with Noble Predictive Insights, found that 48% of registered voters picked inflation as the top issue from a list of 18. That was followed by illegal immigration (33%), crime/violence (28%) and economy/jobs (24%). Right now, federal spending is the biggest inflation-driver, so politicians should be paying attention as voters look for someone to blame for their misery.
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