Black Friday was not only the perfect day for bargain hunting, but it was also the day that the US government debt mountain topped 18,000 billion dollars. In one single day, 32 billion dollars of debt was added to the pile. These are ridiculous numbers, but they are real.
Expressed in percentage of GDP, the US debt mountain now amounts to 103%. People are not publicly talking about plans for reducing that enormous burden. Under president Obama, government debt rose by 70%, but we need to take into account the '08 crisis.
Returns on bonds have been dropping without stopping and for some we are getting close to 0. The ex-president of the US central bank, Ben Bernanke, recently stated that he expects interest rates to remain at these low levels for a long time to come.
US Debt Mountain Could Become Problematic
Within the Fed governor Bill Dudley stated that people should not be expecting interest rates to rise strongly for now as well. In the longer term interest rates will remain lower than the historical average for the simple reason that the balance has been shifted.
That means that when the FED will start raising interest rates the ceiling will be much lower compared to previous interest rate cycles. Savers and investors will have to start facing the fact that interest rates will remain low for some time to come.
The US government will do everything to keep interest rates low. Raising interest rates would increase the burden of this government debt as Washington would have to pay a lot more interest on outstanding debt. Getting to 20,000 billion only seems like a matter of time.
