Are you prepared for Z day?????
July 15, 2009
– Comments (4)
Z day is defined in Alstrynomics and occurs when the the cost of SERVICING debt exceeds incoming revenues.
Currently, the Federal Government is taking in a something North of $2 Trillion annually.
Expenses are approaching $4 Trillion leaving approximately a $2 Trillion dollar deficit. That's right, the Federal Government is spending about twice as much as it is taking in and primarily responsible for keeping our economy from crashing into a severe depression.
Interest expense is the fourth largest line item expense for the Federal government exceeding $500 billion annually.
Interest expense now consumes OVER $25% of the receipts coming into the Federal Government.
With the economy slowing, and the deficit increasing by about 20% this year, it is very possible that interest expense could approach 50% of Federal tax receipts within a year.
If such a high percentage of incoming revenues is allocated to paying interest, it seems likely that higher interest rates will be demanded of the Federal Government driving an even greater percentage of incoming revunues allocated to paying just interest.
As you can tell, based on a slowing economy and continually rising deficit, it seems clear that the Federal Government is on a direct path to Z day......a path that may be much shorter than many think.
RSS Headlines
Fool UK