Michael Pento on interest rates

Long-term interest rate projections

Here are the only numbers I can find for long-term interest rates, from the OMB.

10-year Treasury notes:
2011 3.0%
2012 3.6%
2013 4.2%
2014 4.6%
2015 5.0%
2016 5.2%
2017 5.3%
2018 5.3%
2019 5.3%
2020 5.3%
2021 5.3%

If the debt is 30 trillion in 2021, then 5.3% interest would be 1.59 trillion per year.

Interest Costs

I don't know where the CBO is getting their numbers for "net interest". I do have a good source for "gross interest", however. Since gross interest seems to be about double the net interest figures however, let me revise my previous calculations.

I would say that we have reached a tipping point if gross interest exceeds 40% of revenue. When will this occur?

First, here is the data on interest from http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

Year Interest
2006 406
2007 430
2008 451
2009 383
2010 414
2011 454

For a projection, I use the CBO's numbers for net interest and double them:
2012 476
2013 526
2014 582
2015 672
2016 814
2017 968
2018 1090
2019 1182
2020 1264
2021 1326

If revenues increase by 5% thereafter, and interest increases 8%, then the 40% tipping point would be in 2036, when revenue is 10330 and interest is 4206.

I am obviously all over the board here in my numbers, but that doesn't change the fact that we do have a problem which won't occur right away.

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Update: The OMB's projections for net interest are much higher. If I use the same formula of doubling net interest to get gross interest, then the projections would be:

2012 480
2013 644
2014 842
2015 1010
2016 1168
2017 1322
2018 1460
2019 1596
2020 1726
2021 1856

The gross interest in 2021 of $1856 billion is 37.7% of the revenues in that year.

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Update 6/19/2012: This is model G-1. Model G is the theory that interest in excess of 40% of revenue is a tipping point.