2015 is memorable for several reasons. A grainy picture of a woman’s dress appeared online and made the entire world question its own color perception. (Was it blue and black or white and gold? The debate still lingers.)
Meanwhile, in February of that year, the New England Patriots secured a nail-biting Super Bowl win over the Seattle Seahawks. With just one yard to go, Seattle chose to pass instead of running the ball. New England intercepted the attempt, sealing a four-point victory. That decision is still considered one of the worst play calls in football history.
But as questionable as that call was, an even bigger blunder took place in February 2015 – one that continues to haunt us financially today.
That year, the Federal Reserve pushed short-term interest rates close to zero (0.25%, to be exact) and embarked on a massive bond-buying spree known as Quantitative Easing (QE). They printed money to purchase enormous amounts of long-term Treasury bonds, artificially suppressing interest rates. At the same time, the U.S. Treasury Department was financing record deficits through new bond issuance. In February 2015, they raised nearly $66 billion by issuing a 10-year Treasury note that paid investors – primarily the Federal Reserve’s QE program – a mere 2% interest.
Now, here’s where things get messy. The Treasury Department doesn’t have the money to pay off that $66 billion bond from 2015. In fact, they’re still running deficits and borrowing more money every week. To repay those investors, they’ll have to issue a brand-new $66 billion bond.
Two major things have changed since 2015. First, the Fed is no longer playing along. Back then, they were aggressively buying Treasury bonds, but now they’re doing the opposite – selling off billions of dollars in a process called Quantitative Tightening (QT). This has helped drive interest rates sharply higher. Second, when the Treasury refinances that 2015 bond in 2025, it will have to pay an estimated 4.5% interest – more than double the original rate. That means an extra $1.65 billion in interest payments every year until the bond matures in 2035. And who’s on the hook for that? You, the hard-working taxpayer and your generational offspring – not the policymakers and politicians who made these decisions.
Trump and his Treasury Secretary, Scott Bessent, are right to focus on 10-year interest rates instead of short-term rates. Meanwhile, Fed Chair Jay Powell claimed last year that he didn’t know why long-term rates were rising. But the reason is clear: his QT policy is driving them up. As more of these old, low-interest bonds mature, interest costs will continue to balloon – unless 10-year yields somehow come down. That will take a herculean effort from Trump and his team of deficit hawks, led by waste-cutting crusaders like Elon Musk.
When you compare the last decade of reckless fiscal management to Seattle’s infamous Super Bowl play call, the football blunder seems almost forgivable.
