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Originally posted by Sidd Finch
Shockingly, there are other factors influencing interest rates besides the size of the US deficit. Like the money supply which, also shockingly, is somewhat higher now than it was in 1993.
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With bond markets it call comes back to fiscal discipline. Greespan will cut the interest rates when he thinks the economy is handled well. The long term interest rates will come down if they think the deficit will stay under control. A runaway buget deficit in a growing economy leads to inflation. The only way to get the inflaction under control is raise interest rates.
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Originally posted by Sidd Finch Put differently, Bush has China to thank for keeping the US afloat, and Bush has left us a bit more vulnerable to the Chinese government than I, for one, feel comfortably with.
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People invest in US bonds because they are considered the most stable and dependable in the world. The fact that people buy them shows their confidence in them.
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Originally posted by Sidd Finch And while I would never, ever question the wisdom of the market with you --- after all, this is the same market that determined that companies like Webvan and Red Gorilla were worth umpteen billion dollars --- I would suggest that anyone who bet against the deficit reduction act lost.
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Now you are confusing the stock market with the bond market. Clinton raised spending higher than the growth rate in a growing economy and raised taxes. This leads to inflation. That is what freaked the markets out. If the Repubs had not been elected in 94 we were headed for trouble and the markets knew it. Raising spending faster than the growth of the economy and raising taxes to cover it in a growing economy is a sure fire formula for infation.
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Originally posted by Sidd Finch Or, is it your position that the surplus would have been exactly the same size if government revenues had not increased? (Wait, let me guess -- the Clinton tax increases stifled enterpreneurs and prevented the US from seeing any economic growth in the 1990s -- right?)
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If Gingrich had gotten his way the surpluses would have been bigger and we would have cut taxes much more than they were raised by Clinton. Unfortunately Clinton would rather shut down the government than let that happen.
