Re:U.S.'s $13 Trillion Debt Poised to Overtake GDP
by mechanical_fish on Sunday June 06, 2010 @11:11PM
(#1409736)
Let's let James Galbraith answer that:
What is the nature of the danger? The only possible answer is that this larger deficit would cause a rise in the interest rate. Well, if the markets thought that was a serious risk, the rate on 20-year treasury bonds wouldn't be 4 percent and change now. If the markets thought that the interest rate would be forced up by funding difficulties 10 year from now, it would show up in the 20-year rate. That rate has actually been coming down in the wake of the European crisis.
If there's a better place to keep wealth than US Treasury securities, nobody seems to know what it is.
What is the nature of the danger? The only possible answer is that this larger deficit would cause a rise in the interest rate. Well, if the markets thought that was a serious risk, the rate on 20-year treasury bonds wouldn't be 4 percent and change now. If the markets thought that the interest rate would be forced up by funding difficulties 10 year from now, it would show up in the 20-year rate. That rate has actually been coming down in the wake of the European crisis.
If there's a better place to keep wealth than US Treasury securities, nobody seems to know what it is.