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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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  • The Interest Expense To Federal Receipt Ratio 4 comments
    Dec 4, 2012 1:21 PM

    I was curious on how much of U.S. tax payer revenue was going to interest payment on government debt at this time compared to history and surprisingly the U.S. is doing very well.

    Tax revenue data came from here and is at almost $3 trillion annually ($2.683 trillion to be exact).

    Interest expense on debt data came from here and is at $400 billion.

    If we just divide those two then we get chart 1.

    And yes, surprisingly, the interest payment to bond holders is going down compared to the tax revenue the federal government is getting today. Historically, we had the highest interest payment to revenue ratio in 1991, which was 26%. Of course, the interest rate was much higher then.

    (click to enlarge)
    Chart 1: Interest Expense to Federal Receipt Ratio

    If we were to have the interest rate of 1991 today (7% for 10 year U.S. bonds). I bet we would be higher than 26% already.

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Comments (4)
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  • dieuwer
    , contributor
    Comments (2255) | Send Message
     
    No Japanese problems yet :)
    4 Dec 2012, 01:50 PM Reply Like
  • Katchum
    , contributor
    Comments (532) | Send Message
     
    Author’s reply » For Japan we have 22 trillion yen in interest payments http://yhoo.it/MCWrdj

     

    Versus

     

    40 trillion yen in tax revenue. http://bloom.bg/11OIYoC

     

    That's indeed 50% which is very high.

     

    If the Japanese 10 year bond yield doubles, the interest expense will also double. Which makes Japanese people pay their taxes all to interest on debt.

     

    But, Japan has a current account surplus..., which the U.S. doesn't have.

     

    And the interest payments will stay in Japan and circulate in their economy.
    4 Dec 2012, 02:28 PM Reply Like
  • dieuwer
    , contributor
    Comments (2255) | Send Message
     
    Not anymore, they have a current account deficit. Surprised you missed it:

     

    http://on.wsj.com/Vy9aQR
    4 Dec 2012, 03:06 PM Reply Like
  • Katchum
    , contributor
    Comments (532) | Send Message
     
    Author’s reply » Maybe that's why the yen went down so fast.
    4 Dec 2012, 03:28 PM Reply Like
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