In 2020, interest payments were a little over $500 billion, but they have almost doubled since then.
Congressional Budget Office projections show that these interest payments will take up ever-larger portions of the federal budget, causing deficits to sink even further. The government will have to use more debt to pay off past debts.
On top of all of this, the US Treasury is running out of buyers for its debt. The Fed, which has always been a ready buyer of government debt with newly created money, is allowing its holdings of US Treasury securities to roll off its balance sheet. It cannot resume monetizing the debt without exacerbating price inflation, which is still above its stated target of 2 percent.
Like the Fed, foreign governments such as China and Japan are also reducing their purchases of Treasurys, leaving the US with a smaller customer base for its debt.
This too-much-supply and not-enough-demand phenomenon came to a head at an October Treasury auction that turned into a fiasco when thirty-year yields reached 4.837 percent and primary dealers, who are required to purchase any leftovers, had to mop up over 18 percent of the auctioned debt.
So, everybody’s appetite for US government debt is running low, and that includes foreigners, the government’s own money printer, and favored financial institutions.
What does this mean for next year, when $7.6 trillion in government debt will mature? This is almost a third of all of the US’s outstanding debt, which means a ton of supply is about to hit this market with already declining demand. Unless the government decides to tighten its belt and dramatically reduce spending (flying pigs are more likely), it will have to replace maturing debt with more new debt.
Is the end near or will the idiots in DC cut spending???