Yellen Slam-Dunks The Debt/Inflation Critics

[WHITT]

As rising government bond yields stir up angst on financial markets, one person who sounds unfazed is U.S. Treasury Secretary Janet Yellen. Her own go-to measure of debt costs is headed in the opposite direction.

Interest payments on the national debt fell last year, to $345 billion or 1.6% of gross domestic product. They're on track to shrink further in 2021 -- even after all the pandemic spending, plus a debt-market selloff that's taken 10-year Treasury yields to the highest in more than 12 months.

That's because the government is rolling over bonds it sold years or decades ago, when its borrowing costs were higher. It would take Treasury yields averaging about 2.5% across all maturities -- well above where they are now -- to turn that trend around, according to calculations by Bloomberg Intelligence. Even then, U.S. debt service costs would be comfortably lower than they've been in the recent past.

All of this helps explain why President Joe Biden's administration, which just passed a $1.9 trillion pandemic relief bill, is lining up trillions of dollars more spending to help infrastructure and industry -- and isn't concerned if it has to borrow a chunk of the money.

Public spending to counter the pandemic has already taken U.S. debt to a post-World War II record. And the cost of new borrowing has jumped. Ten-year yields were trading at 1.61% as of 3 p.m. on Tuesday -- double what they were as recently as November. The increase has been driven by expectations of faster growth and inflation, as vaccines enable a consumer rebound from the pandemic slump.

But Yellen says that the size of the government's interest payments are the best guide to how much spending room there is. As a share of the economy, those outlays are "no higher than they were back in 2007," she told ABC's "This Week" on Sunday -- even though the national debt is more than twice as big as it was back then.

BAM!


BLOOMBERG:
[link:https://www.bloomberg.com/news/articles/2021-03-16/yields-have-a-long-way-to-go-before-they-sting-yellen-s-treasury|

[PoliticAverse]

1. A lot of people may end up being sorry they're holding long term debt with such low rates. n/t

[empedocles]

2. Very true. However, the hunger for immediate yields seems insatiable.

[Takket]

3. there is really no reason we can't have our cake and eat it too

there is plenty of spending to do but we don't need to add to the national debt to do it. the rich have has since Reagan to sock away trillions of dollars and they have done it. capital gains, wealth tax........ we can pay down the debt, spend the money we need to spend, and the filthy rich will STILL be filthy rich. there is more than enough money sitting there collecting dust because of decades of wealth distribution to the top.