As Corporate America’s Interest Burden Collapsed, US Government’s Soared

Much has been made of the C-suite's falling interest burden, a trend that accelerated in 2020 and 2021, when companies took advantage of the Fed's explicit backstop for corporate credit and record-low rates to lock-in and term-out. Even more's been made of the US government's rising interest burden, attributable to higher rates in the post-pandemic macro-policy environment. The former phenomenon (the collapse in corporate America's interest payments as a share of, for example, economic profits

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6 thoughts on “As Corporate America’s Interest Burden Collapsed, US Government’s Soared

  1. Trump, like Musk, does not understand that basic concept either. Evidence his first term when he tried to run the govt like the Trump Organization and discovering people did not necessarily obey his commands. This time round similarly his expected avalanche of executive orders. Let the pettiness begin.

  2. I know I’m beating a dead horse on this topic, but household interest income is up significantly as well. The increased government interest payments are injecting roughly $2T a year more into the world now than they were 3+ years ago and it’s not like investments or real estate have gone down.

    Please correct me if I’m not understanding that correctly, but if I am, that’s a lot of stimmy. I can only imagine what would happen to the markets if the Fed did cut rates despite a continued strong economy. Seems to me the only way out of this mess is, oh, I don’t know, raising taxes on investment income?

    1. Well, it has proved quite unorthodox, because all that interest has had a counterbalancing effect to the restrictive intent the Fed had in raising rates, and so when rates do come down at some point, with the intent of stimulating the economy, for the fortunate people earning interest, there will be a corresponding de-stimulative effect.

      Are the lags truly long these days, or are the effects simply much more muted?

  3. “stone cold moron” had me dying, thanks for the laugh!
    Would you mind expanding on the statement “that’s not how it works”? In other words, why can’t the government increase bond issuance when rates are low (perhaps not exclusively but lean heavily) and/or why shouldn’t they? Not trying to be confrontational, just trying to understand.

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