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The double digit rates were because of the inflation following the dollar being de-pegged from gold in 1971. It was easy to pay the massive interest rates becau
by scoofy 1y ago
The double digit rates were because of the inflation following the dollar being de-pegged from gold in 1971. It was easy to pay the massive interest rates because the point of the high rates was to bring inflation down. The idea was that people did not want to hold US debt exactly because the inflation was a de facto partial default.
- ajross 1y agoI don't follow that economics. How does interest rates being high make bonds easier to pay? And how to I get some of that action, that sounds pretty magic to me. :) (No, that's not correct. Borrowing in the 80's was more expensive. Period.)
- scoofy 1y agoYou’re mistaking rate vs outstanding debt. If I have a $1M mortgage at 6%, and a $1000 credit card debt at 25%, which is harder for me to pay off, assuming I make $100K per year?
- ajross 1y agoClick on the link. I assure you I am not.
- scoofy 1y agoI see your point. I suppose my only response is that a significant amount of our debt is being rolled over annually. It’s currently being rolled over from extremely low interest rates to non-trivially high interest rates. We should expect the spike on the left side of the graph to keep increasing unless rates decline significantly, soon.