Stopped Agaom

Stopped Agaom:

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Posted on March 18, 2007 in Dureji Jan 2007 #

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Fabiana says:

On April 29, 2012 12:38 AM

By :By :By :By :there doesn't have to be a day of reckoning. you can just have an eomnocy that grows at a slower rate than would be w/o deficits or stimulus. there are deficits around the world because of a massive financial crisis. budget deficits need to be brought under control but long term what needs to happen is that the national debt needs to stabilize. it doesn't need to go away.There doesn't have to be a day of reckoning but there will be if nothing is done with the current deficit levels and debt. We're around .9 debt/gdp ratio this year, and perhaps .8 or so after a recovery. That's a bad place to be either way. Healtcare makes things worse. Fighting multiple wars makes things worse. Government needs to cut spending AND raise taxes and I'm not convinced the political will exists to do it. The US, with its strong eomnocy can do some tricks inflation of the dollar transfers some of the burden to our creditors (causing us to lose some creditors). We're still the safe heaven investment choice when things go bad. We can artificially keep rates down longer. But we're slowly but surely blowing our reputation as being a country with a sound and conservative financial system (that we built up during the last century). There's no free lunch.the US 30 year is near 5%. there are no worries about the US. interest rates plunged during the crisis. some short-term debt briefly went negative. the market is not worried about the US paying anyone back. of course we can't run huge deficits.Yeah, agree that for now we're ok and there's no immediate panic. Though, arguably, part of the reason rates are so low is because of manipulation by the Fed (or indirect manipulation by debt swaps with other central banks). But once you have debt/GDP > 1, things start to get challenging, and we may fall into a debt trap where servicing costs become too high to make a significant dent in the debt.our servicing costs are lower than they were in the 1990s. people have been saying that interest rates are going to skyrocket. they've been saying it for years. I've thought that for years. look up RRPIX or RYJUX and see how good that has gone for people. I never thought we'd run a 9% deficit and bonds would be so quiet. clearly there is something going on that I and many other people can't comprehend. just look at japan for an example. until interest rates go higher I'll put myself down as someone who doesn't understand the bond market. I don't have to waste time making excuses that way! Rate this comment: 0 0

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