As I wrote last week, the recent Treasury bond auction did not go well.
Megan McArdle discussed some of the consequenses of growing difficulty for Federal borrowing in this article, linked to by Instapundit.
McArdle notes:
"For a while now, I've been asking people at conferences, on and off the record, what America's sovereign debt risk is? That is, how long until people stop treating treasuries as the "risk free" securities, and start demanding a premium for the risk that we might default.The answer from the right has been a nervous (perhaps hopeful) 2-3 years. The answer from the left, and professional Democratic wonks, is some unspecified time in the future. Probably, there will be a Republican in charge. Markets hate Republicans.
But last Thursday (5/7), the Treasury auction was . . . well, descriptions vary from "weak" to "horrible". This raises the unpleasant possibility that markets are, as my business school professors insisted, "forward looking". Voters may believe that getting a bunch of special interests to agree in principal that costs should be cut is the same thing as actually cutting costs. Bond markets don't."
McArdle goes on to point out that as the Obama Administration continues to borrow, with no apparent end in sight, a big day of reckoning may be upon us.
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