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Main Forum•Of Little Interest (cost)
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- Private_Client
- April 2011
- Permalink
The US Government does a great job of not paying much interest on their total outstanding debt of $14 Trillion.
This is how the Government manages its interest cost to a (relatively) negligible level.
For the 12 Months to February 2011: Interest on Debt Securities: ($424 Billion) Rebate of Earnings: $100 Billion The Federal Reserve pays a dividend on its earnings on assets purchased. Rebate on Public Debt: $185 Billion Even though the Government issues bonds to Public Government Departments, the interest is actually rebated on the outstanding public debt of $4,600 Billion. Net Interest Cost: ($139 Billion) On $14,200 Billion of outstanding debt - a little bit less than 1%.
With Quantitative Easing, the Federal Reserve is investing in 10 year bond yielding 3.5%, and paying for it by borrowing short term funds from the banks at an interest rate of around 0.15%. The positive funding return is rebated back to Government. (source: www.fms.treas.gov )
The decreasing net interest costs is quite impressive given the increasing Trillions of outstanding debt.
Michael Cornips to view graph visit: http://www.traderscircle.com.au/free/email/articles20110412.html
