marketoracle.co.uk / By Axel Merk / Dec 18, 2012 – 06:31 AM
While Treasuries are said to have no default risk as the Federal Reserve (Fed) can always print money to pay off the debt, hidden risks might be lurking. As oxymoronic as it may sound, the biggest risk to the economy and the U.S. dollar might be, well, economic growth! Let us explain.
The U.S. government paid an average interest rate of 2.046% on the $11.0 trillion of Treasuries outstanding as of the end of November. Treasuries include Bills, Notes, Bonds and Treasury Inflation-Protected Securities (TIPS). At 2.046%, the cost of carrying the Treasury portfolio currently costs the government $225 billion per annum; about 6% of the federal budget was spent on servicing the national debt. 1