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Low bond yields may buy spending time

Mitchell Hartman Aug 31, 2010
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Low bond yields may buy spending time

Mitchell Hartman Aug 31, 2010
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BILL RADKE: The U.S. government is borrowing more money than ever these days — and it’s cheaper than ever for taxpayers. That’s because the yields — that’s the interest that investors get paid on government bonds — are at record lows.

Marketplace’s Mitchell Hartman tell us that could give the Obama administration time to continue deficit spending.


MITCHELL HARTMAN: Even as the government has borrowed more to fund things like stimulus, unemployment benefits, wars — the cost of servicing the debt is down nearly 20 percent. That’s because the Treasury is paying rock-bottom interest to investors who buy its bonds.

BARRY BOSWORTH: This is not good news.

At least not for the economy, says analyst Barry Bosworth at the Brookings Institution.

BOSWORTH: This is not some sort of approval of the administration’s policy. It just tells you how bad the economic situation is — that there’s nothing else for people to do with their money.

Stocks are doing lousy, companies aren’t borrowing. Everything seems risky. Except U.S. treasuries backed by the full faith and credit of the U.S. government.

But Bosworth says market sentiment could turn against soaring U.S. debt.

BOSWORTH: People could begin to doubt that you intend to repay it. And that’s basically what happened in the case of Greece.

Deficit hawks want the administration to ratchet down spending now, to convince investors we’re not headed that way.

I’m Mitchell Hartman for Marketplace.

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