I do not know if the date of the exchange between Yellen and Kennedy is the same as the time stamped 24 hours ago, UK time.
There are lots of good questions about the Biden budget proposal to increase US Government debt from 33 trillion to 50 trillion, over the ten-year budget period to 2033, so I assume it may be from last year.
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Senator Kenndy was accusing Treasury Secretary (and ex-Fed Chair) Yellen of injecting a sugar high into the economy ahead of the 2024 elections, because the Treasury was borrowing at the short end of the market at 5% rather than at the ten-year ed of the market at 4%, and was also costing the US taxpayer extra money in interest. No mention was made of how much was borrowed short rather than long. 1% of 50 billion bucks would cost 500 million dollars a year – IF – rates persisted at 5% (the market thinks they won’t remain this high and anyone can bet on those expectations in unlimited volume!).
2. A borrower like the US Treasury, or an investor, decides where to borrow or lend money based on expectations of interest rate movements, not just today’s rates. This is the implied forward yield curve.
3. As a borrower, Yellen is making the bet that interest rates at the short ed will fall from 5% to well below the ten-year rates of 4% at some point in the future – I guesstimate to 3% in the next five years.
4. Neither Yellen nor the US Treasury set short term interest rates – the Fed does. Market players far bigger than the Treasury or the Fed set longer term rates based on expectations of the path of interest rates over the term of their borrowing/investment horizons to reflect inflation expectations over the longer terms with a little risk premium thrown in. Neither the Fed nor the Treasury set long term rates, they influence them, but do not set them.
5. Yellen made the following remarks about the affordability of the debt interest burden relative to GDP, taken from the 24:29 minute mark.
“… a better metric for assessing what the impact of the budget is on our economy and whether or not it's manageable is real net interest on the um the real net interest payments that we have to make relative to the size of our economy.
and they were those real net interest payments were throughout the 10 years of the budget at around or under 1% of GDP which is historically normal, so debt is increasing the size of the economy is increasing interest rates are moving back toward more normal levels after a period of many years in which they're exceptionally low
and yet overall, what you see in this budget is real net interest on the debt stabilizing at about 1% of GDP which is a manageable and historically normal number so $51 trillion of debt up from 33 trillion…
Now this chart stops I 2024 and does not have the path to the 2033 Bide budget plan, but nonetheless, the starting point for 2023 is not “an affordable” 1% in interest costs as a percentage of GDP, it is already
- far more than double!
6. It is not clear to me whether the assertion that the situation would be worse were Biden’s proposed ten-year budget refers to a ten-year plan to 2033 with a climate emergency “factored in”, AND ALSO with a theoretical Biden mitigation of that “disaster scenario” included.
Perhaps subsequent to that exchange, we have this statement from Yellen in Brazil a month ago:
7. A key point missed by Senator Kennedy when Yellen blamed the C19 scamdemic was THE PANDEMIC ENDED IN MAY 2023!!!!
Prices, taxes and spending should have REVERTED TO PRE-SCAMDEMIC LEVELS – they haven’t. All we are seeing is disinflation – a slowing of the rate of increase of inflation.
Onwards!!!
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In simplistic terms I understand that of the 100% money that America has to spend each month to keep itself afloat and not go bankrupt, 40% is taken out to pay off interest on the financial loans, of trillions owed to the World Bank or other investors and defaulting payments on that, would destroy America and bankrupt it, because America needs the monthly injection from the banks, to keep the American Government and Military model functioning - the remaining 60% covers doing that.
By borrowing more money, that increases the 40% interest owed monthly, where before that payment in 1941 was yearly and then became ever 6 monthly and now is down to each month, or it might be weekly, I'm not sure - but it shows how close America is to defaulting and folding, via its economy when those interest paymetns are so close together - implying lack of trust by the banks which dictate America's policy to it - to keep the money rolling in - "He who pays the Piper calls the tune".
In simplistic terms I understand that of the 100% money that America has to spend each month to keep itself afloat and not go bankrupt, 40% is taken out to pay off interest on the financial loans, of trillions owed to the World Bank or other investors and defaulting payments on that, would destroy America and bankrupt it, because America needs the monthly injection from the banks, to keep the American Government and Military model functioning - the remaining 60% covers doing that.
By borrowing more money, that increases the 40% interest owed monthly, where before that payment in 1941 was yearly and then became ever 6 monthly and now is down to each month, or it might be weekly, I'm not sure - but it shows how close America is to defaulting and folding, via its economy when those interest paymetns are so close together - implying lack of trust by the banks which dictate America's policy to it - to keep the money rolling in - "He who pays the Piper calls the tune".
W.H.A.T. R. CU. TAKKIN . BOUT. .. ????