Macroeconomics checkin

Assertion 1: The federal reserve can't raise rates above around 5%. The government would be paying 50% of tax revenue to interest payments if bonds had the same yield they did in the year 2000. In 2000, the 10-year treasury bond yielded 6.7% (https://www.multpl.com/10-year-treasury-rate/table/by-year). Today, the federal government has $29T in debt and $4T in yearly tax revenue (https://www.usdebtclock.org/). 6.7% * $29T = $2T. This creates a sort of natural cap on how high the federal reserve can raise interest rates (they went up to 15% to fight inflation in the 1970s and 80s.) Thus, they'll have no choice but to stay between 2% and 5% until inflation eats up the debt (which you'll see by a increase in GDP and thus an increase in taxes, both in dollar-terms but not in real value). So either inflation stays down all on it's own, or it goes up on it's own. But if the fed needs to raise interest rates above 5%-ish to stop it, they just can't without bankrupting the federal government.

Assertion 2: The federal reserve bonds can't pay real returns. If inflation is already above 5%, and the federal reserve can't raise interest rates above 5%, then it can't pay real returns on bonds. It simply cannot issue a bond with a positive real return rate. I don't know what that means yet, but it probably means something.