Most people don't realize that when we discuss the national debt, or deficit, what we are talking about is the sale of Treasuries. Bill, notes, and bonds (the name is determined by the length of the IOU to maturity).
Well, the most recent sale of the Treasuries was last week and was an unmitigated disaster.
What this means is that at current interest rates (and this is not the "Fed funds rate" you hear about at the FOMC meetings, but the current, principally 30 or 10 year, rate) no one was interested in buying our debt.
What this means, and it is not a speculation, but actual fact, is inflation of the deficit and debt beyond what is currently projected.
Why? Because we will have to finance at higher interest rates. In other words, to borrow $10 dollars may now cost us 60 cents as opposed to 50. Extrapolate that to 10 TRILLION dollars and you get an idea of just how big a deal this is.
As I have often said, the brilliance of Clinton and his economic team, lay in their understanding of the association of long term interest rates with the overall economic health of the country.
Worse, the Russians have announced that they are going to fight the use of the Dollar as the international currency exchange.
This would be an unmitigated disaster.
The single biggest issue for the Obama administration, economically, should be to cut the DEBT.
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