"Would you continue to buy notes from a guy who is in debt up to his ears?"
Absolutely if it was Uncle sam and if i stopped my economy, govt, etc. would collapse
You're missing the point, Mike. I am not talking about you, me, or WWII style bond drives. I am talking about the Chinese and other Asians, who can be expected to act rationally and commercially from their perspective as our creditors, which is exactly what they are. Who do you think hold enormous and I do mean enormous amounts of our T-Bills?
I can easily see a situation--heck, it's happening now, look up the figures, I posted them somewhere--in which the Chinese and other Asian central bankers will stop or seriously slow their purchase of T-Bills, then think through the implications of such a thing. The most obvious implication, naturally, if we seek to continue to fund our twin deficits, is that interest rates on T-Bills and therefore everything else that charges or bears interest goes up.
And what are the implications of rising interest rates? The most obvious one is an end to the housing bubble. The second obvious one is that the stock market goes down.
What happens if the housing bubble ends? Study that with clinical objectivity, you will not like what you see. The economic repercussions are far, far greater than the collapse of the tech bubble.
I'm not saying this will all happen tomorrow, but if things continue in their current merry way, they will inevitably happen. And it is this failure on the part of policy makers to act aggressively--heck to even recognize the problems--that concerns me.
It could happen in the next six months or two years, but unless government spending is seriously cut--unlikely, given Iraq and other commitments--and taxes increased, the budget deficit is not going to be seriously reduced from its present astronomical levels. I don'tlike taxes anymore than anyone else, I just recognize that we need a tax rate increase as a matter of good policy.
The trade deficit is likely to be cut substantially when a recession hits, as I expect it will in '06, but that is cutting off your nose to spite your face.
Dont try to be an economist C2
By this logic, everyone who posts here should shut up because they're not professional politicians.
We are all economists, Mike. Our decisions concerning investments, expenditures, work, etc., are to some extent guided by our feelings about the economy, whether we recognize it or not. I choose to look at macroeconomics a bit more deeply than most, but no one has to listen. |
