The National Debt and Bank Rates: Any Relation?
March 22, 2010
If you're worried about bank rates on savings accounts, money market accounts, and checking accounts, should you be worried about the skyrocketing national debt of the United States? Should you be concerned that Congress just raised the "debt ceiling" from $12.1 trillion to $12.4 trillion?
Yes and yes, with a little more "yes"e thrown in for good measure.
In fact, the fiscal condition of the U.S. could turn out to be the number one determining factor as to how much the dollars in your savings account, money market account, and checking account are really worth, when it comes time to draw those dollars out.
1. Interest Rates Rise When Everyone's a Debtor
As quoted in a recent ABC news story authored by Devin Dwyer:
"Within 12 years…the largest item in the federal budget will be interest payments on the national debt," said former U.S. Comptroller General David Walker. "[They are] payments for which we get nothing."
That shocking prognostication suggests that interest rates will be moving higher over the next 10 years. When everyone needs to borrow, interest rates inevitably rise.
2. Inflation Is a Form of Disrespect
Mr. Bernanke of the Federal Reserve says no inflation for the "foreseeable future."
In the grander scheme of things, however, it's only logical to assume that if the U.S. national debt continues to grow in an out-of-control fashion, the currency printed by the U.S. government will come to be viewed as suspect--the government of a country has always influenced the value of a country's money.
Anyone who cares about the value of assets denominated in U.S. dollars can only hope that the U.S. does not become a global laughingstock due to its swollen debt.
