FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
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POSSIBLE OUTCOMES: ALTERNATIVE SCENARIO 2<br />
r<br />
• Government fiscal realities and Government debt<br />
o<br />
o<br />
Despite the large increase in debt over the past 20 years ($4T to $16T) the interest owed by the<br />
Government on that debt has essentially not grown<br />
The annual interest cost to the Government has grown by a mere 1% a year over the past 20 years<br />
o Over this period, the weighted average interest rate on all Government debt fell from a high <strong>of</strong> 7% to a<br />
recent low <strong>of</strong> 2%<br />
o Over the entire period, the average interest rate was 5.2%<br />
Interest Cost<br />
Average Interest Rate<br />
$500,000<br />
8.00%<br />
$450,000<br />
$400,000 000<br />
$350,000<br />
$300,000<br />
7.00%<br />
6.00%<br />
5.00%<br />
$250,000<br />
4.00%<br />
$200,000<br />
$150,000<br />
$100,000<br />
$50,000<br />
3.00%<br />
2.00%<br />
1.00%<br />
$-<br />
0.00%<br />
1<br />
992<br />
1<br />
994<br />
1<br />
996<br />
1<br />
998<br />
2000<br />
2002<br />
2004<br />
2006<br />
2008<br />
2010<br />
2012<br />
1<br />
1<br />
1<br />
1<br />
1<br />
1<br />
1<br />
992<br />
993<br />
994<br />
995<br />
996<br />
997<br />
998<br />
999<br />
1<br />
2000<br />
2001<br />
2002<br />
2003<br />
2004<br />
2005<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
2011<br />
2012<br />
Source: PCA, TreasuryDirect.gov<br />
Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 28
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