Question to Grok:
Will this have any impact the middle class American with an existing mortgage, credit card debt and/or college loan?
The Federal Reserve’s December 2025 rate cut of 25 basis points to a 3.50%-3.75% target range will have limited direct effects on middle-class Americans with existing mortgages, credit card debt, or student loans, as most impacts are tied to variable-rate products or broader market responses rather than immediate changes to fixed-rate obligations. However, it could indirectly ease some borrowing costs over time, particularly for those able to refinance or with adjustable elements in their debt.
In other words, we have no benefits from this cut. So what is the point?
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Question to Grok:
Will this impact the interest paid on the national debt?
How the Rate Cut Affects National Debt Interest
The U.S. national debt—now exceeding $36 trillion—is financed through Treasury securities with varying maturities. Interest costs are determined by the yields at issuance, not the Fed’s short-term rate directly. The federal funds rate influences:
- Short-term debt (e.g., Treasury bills maturing in under a year): These yields track the fed funds rate closely. The cut will lower borrowing costs for newly issued short-term Treasuries by about 0.25%, providing minor immediate relief. Short-term yields dropped post-announcement, with the 2-year Treasury yield falling 4 basis points to 3.578%.
- Long-term debt (e.g., 10-year or 30-year bonds): These make up the bulk of the debt and are more sensitive to market expectations for inflation, growth, and fiscal policy than to Fed cuts. The 10-year Treasury yield dipped only 2 basis points to around 4.16%-4.18% immediately after the cut, reflecting muted market reaction amid concerns over tariffs, deficits, and only two projected Fed cuts in 2026. The 30-year yield held steady near 4.80%.
About 40% of the debt is short-term or adjustable, so the cut could shave tens of billions off annual interest over time as maturities roll over. But with the average maturity around 6 years, full effects will lag.
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Since the Trump Administration is spending money at a faster pace than Biden, the impact of a lower interest rate on an increasing national debt becomes meaningless.
4 responses to “Another Interest Rate Cut”
“exceeding 36 trillion”???
Uh, yeah. How often does this Kobeissi Letter actually look at the numbers? It’s getting close to $38.5 trillion. 36 was months ago.
Grok forgot to mention that a large part of the population lives on the interest from their savings. But who cares about the aged in this day and age?
Abolish the FEDERAL RESERVE. Restore SOUND MONEY (backed by gold/silver/platinum, etc.) and allow the free market to set the rate of interest charged in every lending transaction. It does for the most part anyway. Also abolish the fraud of fractional reserve banking. With those changes in place, banks will finally be forced to pay decent interest to savers to encourage their saving. ONLY monies saved would be available to lend obviously, so the amount of savings will ultimately determine the amount of interest paid, and thus the amount of interest charged by the lender. But money will RETAIN it value and purchasing power as it did when the US was under a gold standard from the late 1800s to 1934 when FDR began destroying that link. In a sound banking economy, BOTH savers and lenders benefit from borrowers and the interest paid. With central banking that creates money out of thin air to lend, ONLY the banksters profit.
Powell ‘supported’ Biden over Trump with his interest rate manipulations, he and The Fed are not neutral. So fire Powell and replace some of the fed governors.