“Debt Explosion”
Long-term interest rates in the United States are likely to double in the next five to ten years thanks to the skyrocketing budget deficits and soaring national debt created by the policies of former President George W. Bush and, to a greater extent, Barack Obama.
The result of such an interest rate hike could be catastrophic economically, according to a 2003 paper prepared by the former senior economist of the Federal Reserve.
From the Telegraph UK:
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 …
… 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.”
All this for what? The bailout approach clearly hasn’t worked …
Oh, and why the hell are we having to read about this in a British paper?
Comments
By Pat Hendrix on July 7th, 2009 at 2:51 pm
A former economist for the federal reserve, at the time when the federal reserve was setting the same policies that landed us in this shit storm, wrote an article detailing how things could get worse. Sounds definitive.
By Evelyn Guzman on July 8th, 2009 at 8:18 am
The explosion of the debt is scary. True, it could lead to double interest rates but the trouble is that I do not see any alternative plan. Had they not bailed out the economy, I do not honestly think the market will not have bottomed out, sending us to depression.
Evelyn Guzman
http://www.debtchallenges.com (If you want to visit, just click but if it doesn’t work, copy and paste it onto your browser.)