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Macroeconomics  |  August 31, 2012 09:40:59

Debt crisis: Europe is not alone in that

Figure shows the evolution of interest rates (line graph) and the amount of interest (bar graph) for the U.S. debt for the last 35 years. Growth in the absolute amount of interest has a growing trend. In 1975, the U.S. paid the interest on the debt less than $ 50 billion, in 2011 it was already 10 times more - 454 billion USD. It is important to note that the interest rates steadily declined and are currently near historic lows. (SOURCE: CP INVEST)

This is the main reason why the Fed keeps interest rates low.Not only does this loose monetary policy wants to stimulate the economy and help commercial banks to bail out their balance sheet, but also lighten the public finances, which are already beyond the reach sustainability. Any increase in interest rates would send the U.S. into a debt spiral. So talk about the European debt crisis would therefore not be consistent, because the red light is not blinking only in Europe but also in the U.S. or Japan, which has the highest ratio of debt to GDP in the world.

Interest rates and the amount of interest on U.S. debt

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