Monday, February 19, 2007

Heretical analysis of US national debt

Over at The Skeptical Optimist, the US national debt is analyzed as if it were a perpetuity. The implication: that the principal will never have to be repaid and thus US taxpayers shouldn't worry about the size of the national debt or whether we're shortchanging our descendants. I wonder if policy makers at the Bank of Japan or the People's Bank of China have looked at their holdings of US Treasuries in this fashion? Somehow, I think that the Bank of Japan is going to want to unload those Treasuries at some point, or will at least stop buying new ones. For the issuer of a debt to be able to roll over that debt, the issuer needs to find a buyer willing to buy the new debt.

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