I've taken the interest on the debt for the fiscal year 2006, plus the amount by which total debt increased in the 12 months ending Dec 29, 2006. That's because the outstanding debt is increasing even faster than the amount of interest being paid.
(Figures are in billions of US dollars.)
By way of comparison, I also give below two figures - the increase in debt plus interest paid for 2006, and then for 2008. In the latter case, the increase in debt is that from 30 Sep 2007 to 12 months later, and the interest is the latest available as per here.
In other words, if America had no such debts, she would have $1.45 trillion more per year to spend on other things.
Interest, plus rolling-up more debt, now equates to some 30% of all non-debt-servicing costs of the States and Federal Government.
According to Wikipedia (that great unimpeachable source of all knowledge) the US budget deficit for 2008 will be approx $400bn. Could be a lot more now. But as the cost of servicing all their current debt is $1.45tn per year this leads me think: what is stopping the USA defaulting on its debts, thereby eliminating its budget deficit and having plenty of cash to spare? Admittedly the rest of the world might get a bit miffed, but the US is the major world military power, with nuclear weapons. Who's going to argue too much? As long as they keep the Canadians sweet, they have a reasonably defendable nation. Pull up the drawbridge and let the world do its worst. They're a bit short of oil, but they'd have plenty of cash to buy it with and someone will always supply it if the price is right. Plus they could do a deal with Canada for its oil shales.
ReplyDeleteA bit of a left field idea, but I bet somewhere in the Pentagon there is a plan ready and waiting if the decision were ever made...................
Reading my mind, Sobers. A cataclysmic default... work out the consequences.
ReplyDeleteSmall personal note - my wife and I have a high credit score (837/850). Today, I got a letter from Citibank that they are cancelling my credit card (one I haven't used for years). Obviously, they're trying to clear up outstanding lines of credit.
ReplyDeleteShouldn't they be clearing off the bad ones first?
ReplyDeleteI understand that there was a default under FDR, because part of the US debt was denominated in gold, but they defaulted by re-interpreting the debt into dollars and then devaluing the dollar versus gold. (I used to have a link to an article about it at Grant's Dispatch, but it seems to have been withdrawn.)
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