Free Republic
Browse · Search
News/Activism
Topics · Post Article

To: NVDave

If interest rates had risen naturally in the face of the banking/RE crisis Obama would not have been able to jam all that debt down our throats. The artificially low interest rates are what let them get away with this, along with a “crisis”.


14 posted on 10/03/2012 5:34:17 PM PDT by 1010RD (First, Do No Harm)
[ Post Reply | Private Reply | To 13 | View Replies ]


To: 1010RD

Very true.

But that’s part of what Simpson is looking at in the S-B analysis: That rates CANNOT stay this low forever. They just can’t.

Thanks to how the US Treasury and the Fed have pursued this “warping” of the yield curve, the Treasury’s debt duration has been coming in on the yield curve - meaning that when interest rates do go up, the interest on the US debt will explode upwards, because the US treasury will have to roll so much paper every year due to the short maturity of the Treasury’s debt portfolio.

The pisser of this all is, when rates go up, there won’t be much we can do to stop them. The Fed has done everything in their power to keep rates low, using one bizarre intervention after another, but in the end, we are issuing so much debt that once the situation in Europe calms down and investors are no longer looking for the “safe haven” to park huge amounts of money, there will be a sell-off in Treasury debt and not a whole lot of clamor to buy new Treasury debt at such absurdly low rates relative to inflation.

Simpson, to his credit, actually worries about this issue. Ryan doesn’t. And that’s why I find it difficult to take Ryan’s plan seriously. BTW, I’ve talked to a bunch of folks in Wyoming who actually know Simpson - and they agree that sometimes, he’s rather short with people, sometimes he doesn’t toe the line on some things Wyomingites want, but overall, they paint him as a pretty straight shooter - he tells you what he’s actually thinking, instead of what he thinks you want to hear.


15 posted on 10/03/2012 9:09:07 PM PDT by NVDave
[ Post Reply | Private Reply | To 14 | View Replies ]

Free Republic
Browse · Search
News/Activism
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson