The yearly interest payment on the United States' national debt is now over $1 trillion. Meanwhile, our government still wants to spend MORE money! Financial expert Carol Roth joins Glenn to explain this insanity and what it means for the country and the average American: "We are in a really perilous financial position."
Below is a rush transcript that may contain errors
GLENN: Okay. Let's see. We have a couple of things.
First of all, Janet Yellen came out yesterday, and said, we can't cut the IRS 80 million-dollar increase.
Because, quote, it will hurt the IRS plans for improved service.
Oh. They had some really great customer service things. That they were going to do.
So can't cut that.
Also, there's a story out, about how our US debt, the interest payment, alone, is now surging past $1 trillion a year.
Carol Roth is in the studio to talk to us about that. Hi, Carol.
CAROL: Hi, Glenn. What a great achievement. Are you excited? We finally got our interest, our credit card payment is a trillion dollars a year on an annualized basis.
GLENN: Yeah. But we can borrow at higher and higher interest rates. So we can make it 2 trillion soon.
CAROL: Right. It's fantastic hath. It's the eighth wonder of the world. Is compound interest. Either you're making it, you're earning it, or you're paying it. And we are paying it.
GLENN: Think of this, remember that debt clock in New York City?
And it was -- I don't remember when they started it. It was $5 trillion. And it would take forever to get to six.
Now, every year, just on interest. And we've just begun this journey.
Just on interest, a trillion dollars.
CAROL: Yeah. I think people don't realize, this is the cost of financing things.
We've already bought. This doesn't get us anything new. It crowds out other spending. It crowds out, as we take productive capital in the market that grows the economy. It's just the worst possible personal finance.
If you're in your home and you overspend, you put everything on the credit card. And now, all of a sudden, you are paying all of this money in interest.
You would say to a family. That's ridiculous. You have to get your house in order.
GLENN: And what that family says to you is, no, no, no. I will get another credit card.
And I will pay that interest. And that interest, because I'm not really paying those things down.
That interest is going higher and higher. Because I'm becoming a greater and greater risk.
GLENN: But you know what people do. If you have your own credit cards, sometimes they will say, oh, there's a great offer over here. There's a 0 percent, you know, introductory rate. So I will just transfer it over here.
We don't have that luxury. The rates just continue to increase.
I think it's doubled in the last like I think 19 months, in terms of the financing costs for the US government.
So we're having to pay higher and higher rates on all of our borrowing, including the interest.
The financing costs of that borrowing.
GLENN: So it was just a couple months ago, that I saw it was $700 billion a year on interest.
That was just a couple of months ago. That was now it's a trillion dollars a year. And we've refinanced only about a third of it, right?
CAROL: I mean, I don't even know if it's that much. I know about a third was coming due over the next 12 months. Yeah, but I don't think we've gotten that yet.
In fact, they said that they will have to borrow just -- forget about the interest payment. But in terms of new money.
Janet Yellen, Treasuries said, over the next six months, almost 1.6 trillion dollars.
STU: It's incredible.
So, Carol, I had Brian Riedl on. It was a couple years ago now.
And we were talking about this problem. And he was talking about how large it was going to get. And what he said, at the time. And he was saying this over and over at the time.
Was, why don't we take these short-term loans that we have made, in this very low interest rate environment. And just lock them in, long-term. Right?
Because we would avoid so much of this.
And like, normally, I come back to, the government doesn't care. They want to spend more money.
But this is the reverse. They will now spend more money on stuff they can't get.
It's just, they're giving money to lenders. Instead of getting all their fancy new programs. It's actually worse for people who want to spend.
Why didn't they do this at the time?
CAROL: This is the biggest debate. I don't know if you're familiar with Stan Druckenmiller. He's this iconic billionaire investor.
Incredibly smart and savvy. And he basically said, he put Yellen right on the hot seat.
Said, this is the biggest mistake anybody has ever made. The fact that we had all of this debt, and you didn't lock it in, over the long-term.
Which in theory, I agree with. And it's something that you and I have talked about.
The issue that has sort of come out, as a bunch of us have done the research. Is that the reason that they didn't do that, is that they couldn't.
There was not enough demand, at those -- you know, high -- high end of the yield curve.
GLENN: Because we shot ourselves in the foot so much.
CAROL: Exactly. And that what would happen when there is no demand and you try to put more supply in, that the interest rates go up.
And so basically, what is believed in economic circles, is that that would have killed the economy, and thrown the Treasury into a tizzy. The Treasury market into a tizzy. So if you read, there's a new report. This Treasury borrowing committee. Just put out this report.
And they said, we recommend right now, that they issue at the shorter end of the yield curve. Things like two-year, and five-year, or maybe ten-year.
Above the normal recommended allocation. Sounds a lot like inflation. Well, let it run higher for a little bit of time.
Eventually, we want to get it back to there.
But the reason is because there is no demand of locking up money with the US government for 30 years.
And the rate that you would have to pay which would absolutely undo everything.
So this is a real concern.
And it's one that doesn't go away. It's not like, oh, well, we're in this tight period.
But they will be cutting spending. And we have all these great initiatives. There's absolutely no appetite to cut spending.
We're obviously in a very tenuous geopolitical environment.
Which Yellen has come out and said.
We have plenty of money to help finance that.
Let alone that escalates.
I mean, we are in a really perilous financial position.
And the Treasury market. And the information that's coming out there, is really telling an important story.
Of course, they make it very opaque. So the average person doesn't understand that.
And the numbers have gotten so high, I don't think people can even process it.
GLENN: So, I mean, I've been saying this forever.
That we are going to pay a very high. Ronald Reagan said it.
FDR said it.
If you don't have your house in order, there comes a point, where it all just comes crashing down.
It doesn't seem to be crashing down.
I mean, it's bad. But people still tell me. We won't lose the reserve currency.
We will be fine. The dollar will be fine.
We will come out of this.
They can't explain to me how. But they seem to be right. I mean, how long is this -- could this last?
GLENN: I mean, that's a -- that's the multi-trillion dollar question.
We don't know. We look at periods of history. We go back and look at 50 years. We look back historically. That's a tiny time period.
When we're living through it. That's a big chunk of our lifetimes. For us to say, oh, it will happen in a day, a week, or what not.
We know we are heading towards that precipice.
What we've had going here for the whole time.
We've had an incredibly productive population.
We have a lot of ingenuity, and we are the cleanest.
GLENN: We're getting rid of that.
CAROL: Yes, so we're on the wrong side. So it still exists, and we're the cleanest shirt in the laundry.
Because we are not the only central bank. That has, you know, committed these sins.
And so there isn't sort of this obvious successor.
But as we've talked about before, when you think about these changes in the financial world order, not every war, brings about a new financial world order.
But every financial New World Order, has been brought about by war.
And to the extent, God forbid, things escalate in a crazy way, that becomes an opportunity to reset what do the currencies look like.
What do the debt loads look like? They change around. They change the rules of the game.
That becomes a reset button for them.
And so I sincerely hope that this is not something that's being looked at, as a potential positive or good outcome.
GLENN: No. No.
Who would look at something like that, and say, it would be an opportunity for a great reset?
No, they're not looking at that at all.
CAROL: No, right.
GLENN: Carol Roth.
I wish we had more time you with, Carol. But thanks for coming in.
She is the author of the book, You Will Own Nothing. She is a former investment banker.
And she gets your town, your job, your finances. Read the book. You Will Own Nothing.
And figure out, a way forward for your life. Carol Roth.