What The Collapse In Interest Means

The current title on our CHART OF THE DAY today is simply 1.53760 percent, which represents the current yield on a U.S. 10-year Treasury.

For folks in the financial industry, that number is "mesmerizing," but we also recognize that a huge swath of the population has no idea what this means or why it matters.

The public has only a basic grasp on what any given stock market index level means, and the media does a MUCH worse job dealing with the bond market.

So let's explain.

The U.S. Treasury rate just represents the rate at which people are willing to lend money to the U.S. government. So when the 10-year U.S. Treasury is at 1.53670 percent, it means people are willing to lend to the government, and receive only 1.5370 percent interest each year for the next 10 years.

If you lent the government $100, each year you'd get a payment of about $1.53 (the principal is ony repaid at the end of the 10 years).

The important question is: Why are people willing to part with their money for so long and receive such a pittance in payback? The government's debt-to-GDP is about 100 percent, and many mainstream pundits, politicians, and economists warn about an imminent U.S. debt crisis ala Greece.

Well, the fact of the matter is that the size of the U.S. debt or deficit just doesn't matter that much. Actually, it's never mattered at all.

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