Author Topic: Government Day-to-Day  (Read 13996 times)

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Offline wilber

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Re: Government Day-to-Day
« Reply #255 on: March 12, 2020, 07:53:27 pm »
Not exactly how mortgages work, but yes of course the lender will structure the payments so the initial payments are mostly interest and small principal which will swap over the term of the mortgage.

When you pay off a mortgage, the portion of the payment paying interest gradually declines and the portion going on principal increases as you pay off the principal. The debt to GDP con means you never pay off any of the principal and all of your payment goes into paying interest. Every five years you have to renew at the going interest rate. Government bonds also have to be turned over at specified periods. Back in the eighties, my mortgage went from 9% to 18% when I renewed. Fortunately I could handle it as could many at the time because their debt load was lower. If interest rates went to 5% today, our economy would collapse because most people couldn't absorb the increase and stay solvent.
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