BREAKING: Annual Interest Payments on U.S. Debt Now Top $1 Trillion

Brien Lundin Brien Lundin

Brien Lundin

November 14th, 2023 Comments
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Now it's getting serious.

You may have heard that Bloomberg just reported that the annual cost of financing the U.S. debt has soared to over $1 trillion per year.

As Bloomberg notes, "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."

This chart shows how quickly interest costs have escalated as not only the debt has grown at a frightening pace, but also as interest rates have soared. The result is a mind-boggling increase in the bottom-line interest expense.

Cost of US Debt Pile Surges - Bloomberg Chart

And it's going to get much worse in the months just ahead, as a significant percentage of Treasury debt – most of which was placed in short-term paper even when rates were near zero – is reset at today's far-higher rates.

But none of this is news to you if you've been a reader of ours for any period of time. I've been warning of this precise event... and the resulting political repercussions when interest costs ran past that "big number" of $1 trillion... for years now.

I've been harping on this inevitable event because it would trigger doubts over U.S. credit worthiness and calls from left-wing politicians to repudiate these debt and redirect payments toward entitlement spending.

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...And that kind of talk would spark a crisis in the dollar.

Bloomberg agrees: "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."

The process is gaining steam now: On Friday, Moody's joined Fitch in downgrading U.S. debt from stable to negative:

"In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody's expects that the US' fiscal deficits will remain very large, significantly weakening debt affordability."

Bloomberg was the first to report that federal interest expense has now crossed the $1 trillion threshold. There are other official measures that will soon do the same, including the Fed's own numbers, which are updated quarterly.

As I've reported, the Fed has the number at "only" $981 billion.

When they next update the figure, after this quarter ends, it will be well above $1 trillion, and that will spark more commentary and consternation among the political class.

Brien Lundin

About the Author:

Brien Lundin is the publisher and editor of Gold Newsletter, the publication that has been the cornerstone of precious metals advisories since 1971.  Mr. Lundin covers not only resource stocks but also the entire world of investing. He also hosts the annual New Orleans Investment Conference. To get Brien Lundin’s ongoing commentary on the markets at no charge, click here to subscribe to his free Golden Opportunities newsletter.