Wednesday, November 05, 2008

The 30-Year Bond

Remember when the Bush Treasury killed the 30-year bond? Those were the days when people worried about budget surpluses forever and what would happen as the debt was reduced.
Calculated Risk talks here about the problems of financing the debt in today's environment. One thing that strikes me is the supply of treasury bonds is going to expand greatly. That means the price is going to go down, meaning the effective interest rate goes up. That can put President Obama back in the vicious circle we had in the late 80's--high interest rates mean the budget cost of financing the debt rises, making it all the more difficult to balance income and outgo.

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