by Markus Gaertner on 03/04/2011
... that you can today - beautifully illustrated - read the latest "Global Strategy Paper of the Societe Generale at Dylan Gryce. There does not apply to the exuberant optimism known analyst extremely eloquent graphic (see below).
It shows that the interest burden on explode the existing public debt of the now 15% to 37% of government revenues would really, if interest rates rise to 6.9%. So high is the average interest rate that must pay the U.S. government since the Second World War on its bonds.
Here the key quote from the paper: Suppose the U.S. government
had to pay the 5.8% yield it has paid on average over the last two hundred years? The share of revenues spent ongross interest payments would be a staggering 30% (see chart above). If it had to pay the6.9% it's paid on average since WW2, those big interest payments would account for 37% of revenues. So it's not difficult to see the potential for a dangerously self-reinforcing spiral ofhigher yields straining public finances, hurting confidence in the US governments’ ability torepay without inflating, leading to higher yields, etc.
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