I love this chart so much I had to post it again. Here's the Federal debt (in red, millions $) and here is the rate on the 10yr Treasury (blue).
Hey Schiff, Rogers, Kotkikoff, Rogoff, Reinhart, Greenspan, Walker, Peterson, Simpson, Bowles, and the rest of you...what's your excuse now???
You can add Jamie Dimon with his "roadmap" and Simpson-Bowles comment at the end of his testimony today. Yikes!
ReplyDeletealthough the MMT explanation regarding why increased debt doesnt cause bond rates to spike,is enough for me, wouldnt it be more appropriate to use debt/gdp ratio instead of debt in absolute numbers?
ReplyDeletecan someone explain to me why high govt debt doesn't lead to bond rate rises?
ReplyDelete"Anonymous said... can someone explain to me why high govt debt doesn't lead to bond rate rises?"
ReplyDeleteThe cb sets the interest rate and yields along are relative to the interest rate based on market expectations of future cb activity relative to changing economic conditions and price stability.
A high amount of government debt doesn't lead to inflation, in that deficits generally increase when the economy is not doing well, so a large deficit indicates poor economic conditions, i.e., nongovernment prefers to save rather than spend. That's deflationary rather than inflationary.