While I’m not qualified to evaluate the Federal Debt levels, we are all hearing about the increase in the Federal Debt, and it is fair to note that an increase in debt levels can play a major role in future financial cycles. Our low interest rates in recent past years have reduced risk of instability, but it’s worthy to note that significant increases in interest rates could lead to future instability. Here are some charts prepared by the Federal Reserve in St. Louis regarding long-term mortgage interest rate trends and consumer confidence that you may find interesting.
Most of the charts below come from the Federal Reserve Bank of St. Louis. We have not had time to comment on each chart and what we believe its significance to be (and, in any case, we are probably unqualified to do so), but you might still find them interesting. Increasing debt levels often play an enormous role in financial cycles. In our view, the increasing amounts of debt being taken on within the country and worldwide (both at historic highs) is dangerous, however historically low interest rates have greatly ameliorated the effects. If rates rise significantly, then high levels of debt can easily become economically destabilizing. The first 2 charts look at short- and long-term mortgage interest rate trends because they massively influence the financial effect of debt.The third is on consumer confidence, because increasing confidence often leads to taking on higher levels of debt, and “irrational exuberance” often leads to taking on untenable levels of debt. Then the report dives into national, corporate and household debt statistics.
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