What Are the Dangers of Too Much Debt?

The United States currently pays 3 percent interest on the government debt. Economics professor Antony Davies shows that this year the U.S. government owes $440 billion in interest alone. This is three times the annual operating expenses of the Iraq and Afghanistan wars.

Using data, Professor Davies shows that the situation is likely to get worse. Today the interest rate is the lowest it’s been since the 1960s. If the rate rises to 8 percent, which is what it was 20 years ago, interest payments on the debt will be larger than the annual cost of every war the United States has ever waged combined. The more money the government is spending on interest, the less money it has available to provide other services.

So what should be done? The government should take advantage of today’s low interest rate and pay off as much of the principle as possible now, before interest payments rise to unsustainable levels.

6 Comments

  1. Matt Wavle

    Using the Japanese ideology that business is war, then we are being conquered from our own destructive lenient views on debt.  Is there any political will to reign in spending and get off the back of our economy by lowering tax rates?  I hope there will be a rebirth of freedom.

  2. Brian Phillips

    Following Japans lead, it seems like we are on track to continue printing fiat and devaluing our own currency until it is worth nothing.  Hopefully something changes soon…

  3. [email protected]

    Bitcoin and other systems like it will hopefully be a strong enough challenge to fiat currency to result in less legislative control and a more stable currency

  4. A.j. Olding

    Maybe we should jump to Bitcoin? If this continues, does it not seem likely that eventually the value of the dollar will hyper inflate?

  5. Noah Smith

    cool

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