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Inflation at 8.3% – Want to See the Scary Numbers?

Inflation at 8.3% – Want to See the Scary Numbers?

You probably already know that the Fed raised its interest rates by 0.5% a couple of weeks ago to fight inflation, this month at an annual rate of 8.3%. This is the primary method that we have for mitigating inflation.  But this means that our debt payments (on $30T) went up an addition $152 Billion, and will do so each year until rates go down.

What if we were to raise the rates another, say, 4%, which would be sufficient to quell inflation in normal times, and which some experts are advising now. That would add $1.2 Trillion in additional debt annually.

That is $1.2 Trillion annually that we are on the hook for. It provides no value whatsoever. 

$4000 in new debt per man woman and child in the U.S.  – additional EVERY YEAR.

If you have a savings account in a bank, the current interest rates you are receiving are about 0.7% on your money. This means that if you have $50,000 in the bank, you receive about $350 per year in interest.  But with inflation at 8.3% you are actually losing $3800 in the value of your money.


For someone who has $100,000 or more, or who qualifies as an “accredited” investor, you may be able to find relatively risk-free methods to match inflation. There are some very stable real estate construction loan investment firms that provide a nice 10-11% return. Mutual funds, ETFs and others can perhaps others can help you at least break even if you have a good advisor.

If you are retired and you have your money liquid so that you have access to it, then you are screwed. You are hemorrhaging value in your savings. If this goes on for five years, your nest egg that you worked so hard for all of your life will be devalued by 35%. Fortunately, if you own your home, its value will likely keep up with inflation.

If you are the average joe, making a paycheck and supporting your family, there is little chance of you having a retirement fund, your buying power is decreasing. If you haven’t bought a home yet, then that possibility will get farther and farther away.

The worst part is that it may be too late to reverse course. Even if elected leaders had the guts to try, it is doubtful they could succeed.  We had the debt before Covid, but at least they kept inflation under control. But these assholes spent so much money that they no longer have any method or desire to fight inflation. We spent recklessly and it got many people re-elected.

Whatever you subsidize you get more of. We praised irresponsible leaders, and we got more of them.

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  1. frank stetson

    On the inflation effect on debt, you have me confused. I have noted this before, but apparently to deaf ears. It’s amazing you tout your economics background, this is low hanging fruit to follow this money.

    While inflation effects future debt prices, not sure it directly affects current debt, and indirectly probably enhances our repayments. Why would the repayment price of our current debt change? Did your mortgage payment amount change due to inflation?

    From Wharton: “Inflation has two main effects on the government’s budget and the economy. First, unexpectedly high inflation works as a “soft default” on current government debt since the real value of the debt asset is repriced under new inflation expectations. This reduction in real debt reduces capital crowd-out and increases investment. Second, the U.S. tax code has various elements which are not automatically adjusted for inflation. As nominal incomes rise, nominal thresholds apply at lower real levels and usually increase the tax liability to taxpayers. Additionally, capital income faces a higher real tax burden, as taxes generally apply to nominal, not real, returns on investment. Real tax revenues rise with inflation which generates an ambiguous effect on macroeconomic output: future deficits are reduced, but the after-tax return on investment falls.”

    Before you tell us the source is liberal, it’s Don’s school…..

    Bottom line, we don’t recharacterize our current debt based on inflation, it is not inflation indexed debt. However, future debt would be at inflation-affected rates, whatever they might be. And other effects, like on capitalization, would occur.

    The HUGEST effect risk is not the payments, but the loss of incentive for lenders to consume our t-bills and our debt; they can just not buy new AND they can dump existing, both bad in large quantities.

    • Joe Gilbertson

      I tried to not be confusing.

      Yes, inflation does indeed reduce the value of the debt as well. But, that effect is minor compared to the impact of inflation on people who are on fixed income or have savings accounts. The impact is that most people will get poorer, while the debt stay the same or gets bigger. It is not sustainable. Gini coefficient becomes higher.

      Everything you are talking about with taxes is a wash. The debt is getting higher faster than any tax rise that can be caused by inflation.

    • Ben

      It’s not hard to confuse idiots

  2. frank stetson

    You go with condescending, really?

    “I tried to not be confusing.”

    Well, being wrong is not necessarily confusing; in your case, it’s just wrong.

    You now say: “Yes, inflation does indeed reduce the value of the debt as well,” but I reacted to: “That would add $1.2 Trillion in additional debt annually. That is $1.2 Trillion annually that we are on the hook for. It provides no value whatsoever.” That does not seem like , “yes, inflation does indeed reduce…..” But it’s not confusing.

    You now say: “But, that effect is minor compared to the impact of inflation on people who are on fixed income or have savings accounts.” Well, no duh. For one thing, people can’t print money… While your $50K example is stupid (if I had $50K and got savings interest of .7%, I would kill myself. —- I am getting 3% for a couple more years, 5 yr CDs at 1.5% — so you can double in the wink of an electronic transfer via 1-800 personal service. But I digress — no duh fixed income sucks in inflationary times. Savings/investing —- all of this is based on timing. If you have the time, you can wait it out. If you made some moves in time, you can be in a better place. But generally, it sucks.

    And contrary to the airwaves, it sucks differently based on demographics. Old folks might not get hit as hard by gas. No commute, can minimize trips, etc. Clothes, furniture, mortgage rates, appliances and electronics, no biggee. Food really sucks bad though and not the thing you want to give up.

    But my point was you I thought you made an error in the debt hit, ain’t no 1.2T like you said, not even close, and you were a big enough man not to own up to it. Bravo!

    • Perry

      Idiots like you are easily confused

      • Ben

        Frank you haven’t been spoofed lately.

      • ben

        Try to keep up Perry. Buy a clue.

    • Calvin

      It’s so damned funny how liberal fools struggle to defend brain dead Biden with your lies and spin. And that stupid bastard can’t even make a so called explanation without turning into a stammering idiot. While people are struggling to keep up with the Biden inflation, the fucking nut job won’t do anything to ease fuel prices. He’s too busy trying to justify his illegal existence in the White House. He’s more interested in placing tokens and pointing fingers than building a strong country. So you lefties got what you wanted but good luck getting the real patriots on board with the mush brain idiot And what about his so called justice department being dragged kicking and screaming to protect the scotus? You Biden cult members are a disgrace to America

    • Joe Gilbertson

      Let’s see 4% of 30 trillion is 1.2 Trillion. Hmmmm.

      Sorry, I’m not following the rest of your rambling.

      • frank stetson

        I can understand, given your premise, why you can’t understand how it actually happens in the real world. Here you seem to indicate the debt will be recharacterized due to inflation, that was your original premise. Yet, after my rambling, you agreed: “Yes, inflation does indeed reduce the value of the debt as well.” which seems to be a complete contradiction of, well, yourself.

        Try: why would the current debt, with it’s current interest rate, but recharacterized due to inflation. Did you mortgage get recharacterized? The debt you have for PBP capital assets? Any loan?

        I am not arguing that you know how to handle some math. I am a little more suspicious on your grasp of economics and government funding mechanisms. I am just saying that your portrayal of the debt clearly isn’t how inflation and debt work so it’s a really stupid premise. Really stupid in that it is totally wrong-headed math. You don’t change the current interest %%% based on inflation. Current debt is not inflation indexed. How can you be this stupid? Repeatedly?

        Continue to double down. I can’t fix stupid. This is my second attempt. I may ramble, but your premise is complete hogwash. Factually. Mathematically.

        • Billy joe

          Our economy is sinking and idiots still push Biden and his stupid shit

  3. Jewish Spce Lasers

    I thought trump was going to wipe out the national debt? And his tax cuts would pay for themselves?

  4. Jewish Space Lasers

    I thought trump was going to wipe out our National Debt? And his tax cuts would put for themselves. Must be getting close to midterms, “conservatives” are worried about the debt again.

    • Clifford mckinney

      So what are you saying? That you would rather have a demented old fool like Biden? Are you really a new? You people killed Jesus. But he didn’t stay dead. And you don’t get a do over.

      • Ben

        Gee, what part of ABT do tou not understand ?

      • Windmill Cancer

        I thought the implication was clear. But then I realized you’re a MAGAt, so I will spell it out for you. If trump had eliminated the debt as he pledged to do, as opposed to adding TWO TRILLION dollars to it, Joe’s trusiki wouldn’t be all in a bunch.
        Nice antisemitic rant there! I hope LARRY is reading, because he doesn’t believe this stuff exists.

    • Ben

      Worst GDP growth since Hoover is Trump’s legacy. Highest unemployment, deficits, debts, and printing of free money ever under Trump No winder we get inflation and recession a year later. Trump ran us into the ground like his Atlantic City debacle. “But I made money” was his conclusion.