Peter Schiff: A Massive Fiscal Time Bomb
Federal Reserve Chairman Jerome Powell knew fighting inflation would cause big problems in a bubble economy loaded up with debt. He put it off as long as he could, calling inflation “transitory.” But once inflation became a huge problem, the central bank had no choice but to get into the fight and start tightening monetary policy. The problem is, the Fed’s plan won’t work. And one reason it won’t work is the massive national debt.
Peter Schiff talked about it in this clip from his podcast.
The federal government already spends about $500 billion per year on interest payments on the $31 trillion debt. Peter noted a CNBC discussion where they speculated that in 10 years, the US government could be paying $1 trillion per year on interest alone.
Ten years? We could be paying $1 trillion in interest in one year! How are these guys getting 10 years?”
Four percent of the $31 trillion debt is $1.25 trillion. The average maturity on the debt is under five years. A third of the debt will mature in the next year. Meanwhile, the debt continues to skyrocket. The national debt grew by $1 trillion in just eight months even with pandemic spending programs winding down.
Five years from now, the national debt will be over $40 trillion, and we’re going to have to pay an interest rate probably more than 5% on that. So, a $1 trillion tab for interest on the national debt isn’t a decade away. It’s a year, maybe two away. That’s how close this crisis is.”
That raises an important question: where is the government going to get the money to pay for this? It will cost something like 30% of all tax revenue just to pay the interest on the debt. Huge interest payments will mean even more borrowing.
This is a massive fiscal time bomb.”
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