The Treasury Department tries to hold down interest rates by not dumping bonds onto the world market. The more bonds, the higher the interest rate we must pay in order to get people to buy them. They like to float some and then let the market for American debt get primed again.
But with $2 trillion in debt to move this year alone, the administration has had to keep upping the size of its bond sales. It’s expensive, and can have serious effects on inflation.
Next week, the Treasury will float $104 billion in U.S. debt on the world market to keep paying off our lusty spending.
Next week, we’ll also pay off about $19 billion in debts coming due, making the haul for the week about $85 billion that’s available to pay our ongoing obligations.
In May, the government spent $189.65 billion that it didn’t have will probably do worse in June as the administration tries to “ramp up” stimulus spending.
Next week, we are trying to float an amount of debt roughly equal to the cost of fighting in Iraq and Afghanistan for a year. And we’ll have to borrow even more next month.
The people lending us the money know that we will eventually have to further weaken the value of the dollar to pay off the loans or we would start defaulting.
The price we pay to lenders has risen 2 percent since January — billions more in interest.
So the interest rates will keep rising as lenders try to stay ahead of the inflation they know will eventually follow, just as it does in other desperately indebted nations.
The more we pay in interest, the more pressure is placed on the dollar and the more expensive borrowing money will be. It’s the payday lending approach to government.
