Charts from
contraryinvestor.com show that, as of right now,
there is going to be almost US$1.8 trillion in US
Treasury debt maturing this year, and all of it
will need to be "rolled over" by issuing new debt.
Perhaps it is also instructive that they
also note that "Just shy of 50% of UST debt
'rolls' within three years."
What this
means, in practical terms, of course, is that
We're Freaking Doomed (WFD). "Why?" you ask.
"Because," I helpfully explain, "rising rates of
inflation mean higher rates of interest that
borrowers, especially deadbeat bankrupted
governments, must pay when they try to rollover
such massive amounts of debt!"
And what
were interest rates three years ago when half of all
Treasury debt, now rolling
over, was first issued? I don't know exactly, but
the graph of "US Treasury Bond Interest Rate
History" at observationsandnotes.blogspot.com
shows that interest rates were higher in 2008, and
lower now in the range economists call "squat",
meaning that rates have nowhere to go but up.
Well, perhaps you would be interested to
know that the interest rate on these bonds is
lower than at any time since the 1950s, and is
just inches away from the all-time, record-low of
2% set in 1940.
Or perhaps you would be
staggered, clutching your heart and screaming,
"Nooooooo!" when you learn that the average
interest rate over the years was somewhere just
under 6% ever since the low of 2% set in 1940,
which means that interest rates would have to
double - double! - from here just to get back to
the average interest rate paid on bonds since
1971!
And why was 1971 the big inflection
point where interest rates went nuts? Because that
was when volatility in interest rates really
started Going Freaking Nuts (GFN) because, not by
coincidence, president Richard Nixon severed the
last threads of connection between the dollar and
gold.
And there is a personal reason, too
for picking that date. Before 1971, I was a
fresh-faced kid, his whole bright future ahead of
him, but who decided to make one idiotic,
disastrous decision after another until I ended up
here, decades later, a bitter little man wearing a
bullet-proof vest and a tinfoil hat, hiding in the
closet under the stairs and typing out hate-mail
to the Federal Reserve ("Dear Federal Reserve
morons, I hate you! Signed, Hateful in Florida")
and the Congress ("Dear Congress morons, I hate
you! Signed, Hateful in Florida").
And
even before that, back to 1900, interest rates
were low, and swings in interest rates were much
more muted, too, because the dollar was mostly on
the gold standard, which are two of the beauties
of the gold standard, as we are seeing by just
standing up and going over and looking out at a
world on the verge of panic and ruination thanks
to the Federal Reserve creating So Freaking Much
Money (SFMM) for So Freaking Long (SFL).
And when the people of the world do panic,
they will run to gold and silver, and their prices
will soar, making this investing stuff so easy
that you just gotta say, with every bit of
earnestness you can muster, "Whee!"
Richard Daughty is general
partner and COO for Smith Consultant Group,
serving the financial and medical communities, and
the editor of The Mogambo Guru economic newsletter
- an avocational exercise to heap disrespect on
those who desperately deserve it.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
