Stock Securities on the Coming Debt Squeeze
February 27, 2023
U.S. Government debt outstanding averaged 65.2% of GDP from 1940 until 2022. In 2022 however, it jumped to 129.0% of GDP. In 2022 total debt reached $30.93 trillion and the average interest rate on it was 2.07% reflecting the near zero interest rate environment of the prior half decade. As of January 2023, it costs $261 billion in interest per annum to maintain the U.S. Government debt load, or 14% of all federal spending. However, interest rates on newly issued Government debt are being locked in around 4.0% with the prospect of another 1.0% higher, to 5.0%, by year end 2023. With significantly higher rates and levels of U.S. aggregate debt, net interest costs are projected to jump to 40% of GDP by 2052 according to the Peterson Foundation. At current or even higher spending levels and Congress’ recurring, debilitating need to raise the U.S. debt ceiling, we believe there is a coming debt squeeze whereby public sector financing needs and associated costs will squeeze out private sector financings. Look for equity financing opportunities to be more attractive than debt financing, reversing the trend favoring debt over equity in place since the financial crisis of 2008-2009.
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About Stock Securities LLC
Stock Securities LLC is a FINRA, SEC and SIPC registered broker-dealer specializing in corporate strategy, M&A transaction advisory and private placements. Founded in Princeton, New Jersey in 1993, Stock Securities, its predecessor and affiliated companies have initiated, arranged or otherwise participated as a principal in acquisition, private debt, merger, IPO, joint venture, private equity placement, private investment in public equity, and capital restructurings valued at more than $20.0 billion.
Please contact us or visit our website at www.stocksecurities.com for additional information. We welcome proposals to engage for mutual benefit and promise a prompt and confidential response.
