"Emancipate yourself from mental slavery, none but ourselves can free our mind.” - Bob Marley

Monday, February 23, 2009

Yes, Deficits DO Matter

From Bloomberg:

Treasuries Fall on Speculation U.S. to Increase Citigroup Stake

Anybody who's ever accumulated debt on credit cards, which then increased their interest rates by large amounts, knows this situation. Lots of debt at high interest rates means that just paying the interest off becomes a significant part of of expences, slowing the day when principal can be paid and draining funds from other activities. (I know - Iused to be stupid about my credit cards until about 5 years ago.)

So, the world looks on as we move in the direction of $15 Trillion in debt, and wonders if we can really pay it off. That increases doubt and the world wants more yield, lowering prices. At some point, this can become a vicious cycle, where the demand for higher yield raises the doubts, increasing the demand for higher yield.

So far, the effect appear small - but the possibilities are clear.

We are staring into the abyss - and it is staring back, hungrily.

1 comment:

getyourselfconnected said...

glad we agree via CR's board:
Now of course if a total collapse happens you would be better served with a stash of clean water, seeds, and guns than gold. But if a fiat currency repudiation happens and a new sound money system is put in place, based on gold and silver, you might be glad you had even a little.
JJL | Homepage | 02.23.09 - 10:17 pm | #

My thinking exactly.

About Me

I'm a 57 year old geek. I voted Democratic for 20 years, because I disliked the Republicans more. But now, nobody really speaks for me. I'm for Guns, for more correct government regulation of the financial world, against illegal immigration and amnesty. (in 2008 I ended up voting Republican - too many questions about Obama, and voting against anybody who voted for TARP 1.) In 2010 I voted a stright republican ticket because the Democrats have completely lost their minds.