Article from U.K. Telegraph: US lurching towards ‘debt explosion’ with long-term interest rates on course to double
By Daniel at 6 July, 2009, 3:41 pm
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The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank
In a 2003 paper, Thomas Laubach, the US Federal Reserve’s senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5pc.
The impact would be devastating by making it punitively expensive to finance national borrowings and leading to what Tim Congdon, founder of Lombard Street Research, called a “debt explosion”. Mr Laubach’s study has implications for the UK, too, as public debt is soaring. A US crisis would have implications for the rest of the world, in any case.
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This is the very reason the average American is not spending but saving every penny we have. When we have a government that has stopped listening to the electorate and does whatever it sees fit. When this same government abuses the hard earned taxes they take to bail out incompetent managers that have driven their companies into bankruptcy, there is no program, no legislation that will earn the trust of Americans, whether it is the “cap and spend” bill or the governments “socialistic”, national health care system.
The only good aspect of the present government, and the President is that this nation and the electorate needed a catharsis to shake us out of our complacency into direct action, which this government is copiously producing.
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