A modest prediction....
Reader comment on: McConnell's Marker
Submitted by Fast Eddie (United States), Jan 3, 2013 10:15
Inevitably, the discussion must turn to spending, even if Obama wants even more tax revenue and even if the Republicans cave in again. Nevertheless, spending will dominate the discussion in the coming months, if for no other reason than the approaching debt ceiling fight. To date, the Federal Reserve's balance sheet has swollen by over $2,000,000,000,000 in the past couple of years Ben Bernanke has promised to keep buying Treasuries until some magical time that only he can divine. BUT FROM NOW ON THIS TACTIC WILL NOT WORK LIKE IT HAS UP TO NOW BECAUSE THE 'BOND VIGILANTEES' ARE GOING TO SWOOP INTO THE MARKET AND START DUMPING BONDS AS THEY SEE THAT NO REAL SPENDING CUTS ARE GOING TO ACTUALLY HAPPEN. There may be some spending cuts here and there, but nothing meaningful. It is inevitable that any meaningful cuts will turn out to be imaginary because they will be pushed far into the future, after Obama (and probably Reid) are gone.
Given this scenario, Bernanke's best efforts will not be enough to keep Treasury prices from dropping significantly, thus pushing interest rates up across the board. This used to be called 'pushing on a string' but whatever its called, Bernanke cannot possibly add another $2 Trillion to the Fed's balance sheet and that spells the end of this phony recovery from the 2006-7 recession and the beginning of a much deeper recession as higher interest rates push up payments on the Federal Debt to several hundred billion, possibly in even a Trillion, dollar per year, crowding out spending on all those wonderful transfer payments (Obamacare, Medicaid, Medicaid, Soc Security, Farm Bill, Highway Bill, Green energy, Food Stamps, Unemployment, et. al.) that are so popular now with the tax-and-spend crowd.
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|⇒ A modest prediction.... [291 words]||Fast Eddie||Jan 3, 2013 10:15|
|↔ Time will tell [36 words]||ben||Jan 3, 2013 13:47|
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