EconAir

Secretary of the Treasury UPDATE (8/2026) The expected yearly deficit for fiscal year 2026, ending September 30, 2026, is $2.1 trillion. This is higher than the deficit of $1.9 trillion in fiscal year 2025. One reason is that the expected $200 billion increase in government revenue from increased tariffs has to be refunded to importers and American companies because the Supreme Court declared the tariffs unconstitutional. The national debt will be around $40 trillion by the end of this fiscal year. Total interest expense will be around $1.1 trillion, with the interest rate a little under 3%. Thus interest expense is now half of the total yearly deficit. Another way of looking at this is that half of the yearly deficit goes to paying interest on the national debt. Projections are that the national debt will be around $50 trillion in five years (FY 2031). Yearly interest expense might be between $1.5 trillion and $2.0 trillion, which assumes an interest rate of 3% to 4%. Thes...

  The Red Queen's Race TWO DEFINITIONS   Fed funds rate .    The Fed funds rate is the interest rate banks charge other banks that borrow their excess reserves. It is a very short-term (overnight) rate. An increase in the Fed funds rate increases the cost of capital of large banks (net borrowers) and puts pressure on these banks to raise their lending rates. A change in the rate also changes the rate charged by other sources of short-term funds.   The Fed funds rate is the most watched interest rate in the United States and probably the world. It is not set by supply and demand in financial markets. It is set (fixed) by the Federal Reserve Bank (the Fed), America’s central bank.    The Fed funds rate determines or heavily influences almost all other short-term interest rates in financial markets. It also indirectly influences many other longer term interest rates. It summarizes how the Fed views the economy and near-term changes. It is at the heart of ...