Deficit out of control! Yawn
Deficits are evil! Or maybe not:
So what is the reaction from the bond market vigilantes, those disciplinarians who bid up interest rates whenever past deficits started looming? Yawn.
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The bond market, it seems, has stopped worrying and learned to love the deficit. The question, of course, is whether everybody else can relax, too.
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“Under Reagan in the 80’s, I remember headlines day after day saying we were leveraging our children’s future,” said Lundy R. Wright, a managing director and top bond trader at Morgan Stanley. “But in good times, we got back to surpluses. I think the lesson is, you can borrow when times aren’t so good and cyclical factors will help get you out of it.”
I’ve said similar things before. And by similar things, I mean that the deficit doesn’t have as much impact on the economy as people like to think.
February 9th, 2004 at 11:23 am
And if it were just the deficit then I would not worry all that much either but the debt is what has me concerned. Right now intrest rates are keeping debt service to around 9%, but if intrest rate double in years out debt service is going to be a big drag on everything.
February 9th, 2004 at 11:28 am
But you know the difference between debt and deficit. Sadly, most folks do not.
February 9th, 2004 at 11:43 am
Unfortunately, SA, we aren’t getting out of it. The deficit just keeps getting bigger because we keep spending in excess of what we’re taking in. When there’s a surplus, the government just spends that too, instead of paying down the principle.
Everybody can do that. For a while. Eventually it’s got to catch up.
February 9th, 2004 at 11:58 am
Deficits? Yawn.
Just yesterday I was ranting to Amanda about the state of political discourse in this country. My theory is not exactly a revelation, but what I have noticed is that key words and phrases in our political lexicon that represent…