Saturday, March 13, 2021

Average interest rate paid on Federal debt


Federal debt has exploded since 2008. It had already been on a fast upward trend since the early 1980s, with one slow down at the end of 1990s. Then, the mortgage crisis and pandemic provided quantum leaps up. The upward trend in debt was accompanied by a downward trend in the average interest rate paid on the debt, again starting in the early 1980s. The highest rate paid was just below 14%, and the average interest rate paid now is about 2.5% across all durations. With current levels of debt, I am not sure we can afford higher interest rates or whether higher rates will be allowed by the Federal Reserve. I am not betting on higher rates.

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