The multi-trillion dollar budget deficit may take a few years to cause severe problems but it eventually will. That’s bound to happen, no matter what reassurances we get from the Obama administration or the Federal Reserve.
Ten year Treasury bond rates may be relatively low today. Perhaps they truly reflect what interest rates may be ten or so years from now, But governments that heavily spend today cannot easily unwind obligations in the future.
When economies get out of deep recessions, inflation does take hold. The budget deficit will provide the environment for inflation to get out of hand.
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