We've Been ZIRPed by the Fed

By Mark W. Hendrickson

It isn't easy to earn interest income these days. Interest rates on government T-bills, banks' savings accounts, and certificates of deposit are microscopic. You can blame our government and central bank. They have "ZIRPed" millions of American savers. Here are the details: According to the U.S. Treasury Department, the average interest rate paid on federal debt, as of July, was just under 2.4 percent, implying an annual interest expense on $14.5 trillion of debt of nearly $350 billion. (Net debt, subtracting intra-governmental debt is lower; actual debt, including off-budget items, is higher.) If the average interest rate rose to 5 percent, the annual debt burden would rise correspondingly to well over $700 billion and consume approximately one-third of total federal revenues. At some point, higher interest rates would consume such a large portion of federal revenues that only massive dollar-creation by the Federal Reserve could provide funding for government's myriad programs. Washington simply cannot afford for interest rates to rise, and therefore, the Fed will keep them abnormally low for.... (Read Full Article)