by John Hawkins | March 26, 2009 9:52 am
The United States has a big problem. Barack Obama is already running up unprecedented deficits, is planning to spend more, and he has to borrow the money to be able to do that. In the past, America has never had a problem getting people to lend us money, but the situation is changing.
With economies all over the world suffering right now, more nations are running deficits and the nations with reserves have less money to spend. Additionally, oil prices have plunged — which gives nations like Saudi Arabia less capital to throw around while China has said that it intends to buy less debt as well.
So, in other words, demand for our debt has plunged even as the amount of debt we have to put on the market has skyrocketed. Now, we are starting to see ominous signs that Obama’s irresponsible spending spree is already about to start having major consequences,
Wall Street got rocked Tuesday by a “debt bomb” economists have worried about for decades.
Hours after the United Kingdom failed to attract enough buyers for its auction of $2.5 billion of 40-year bonds, the United States Treasury had similar difficulties with its sale of $34 billion worth of five-year notes and was forced to raise their interest rate to a much higher yield than had been anticipated.
Such problematic debt offerings came on the heels of Germany having two failed auctions of its bonds already this year.
What are the consequences of having difficulty selling our debt? Here’s Stephen Moore talking about it with Glenn Beck,
MOORE: …If there are less buyers for the debt, then guess what happens?×
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BECK: Interest rate.
MOORE: We have to raise the interest rate. Now, guess who is the biggest debtor in the entire world?
BECK: We are.
MOORE: The United States government. And so, if we start seeing higher interest rates, then the cost of this stimulus plan, you know, raises another $200 billion-$300 billion. That’s the problem I had with it when we first started talking about it. Our children and grandchildren are going to pay the cost. This is just fiscal child abuse.
BECK: You know this. You’re right, it is child abuse.
…MOORE: When you think about it, when you think about where the money really comes from, it’s coming from our kids. We are stealing from our kids’ future to finance the national endowment for the arts and other pork programs.
BECK: I contend that it is as bad as — will be as bad as Mexico, but I mean Mexico, you know, 1982, not what’s happening now.
In other words, the cost of borrowing this money is going to skyrocket — and it’s incredibly expensive now. Do you know how much we pay out every year just to pay the interest on the money we’ve already borrowed? In 2008, it was 412 billion dollars. Over the next decade, Barack Obama will add another trillion dollars to that number and that’s an extremely conservative estimate given the difficulties we’re going to have getting people to buy our debt.
No matter how Obama or his flacks in the mainstream press spin it, his spending has consequences — real, honest to goodness consequences that cannot simply be passed on solely to the rich, no matter what they tell you. Stephen Moore called it “fiscal child abuse.” Actually, that’s understating the matter. What we’re really doing is forcing our children into indentured servitude. It’s immoral, it’s un-American, and Obama and the rest of the people supporting him should be ashamed of how selfish they’re being.
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