The Spectacle Blog

U.S. Debt Time Bomb Takes A Licking But It Keeps on Ticking

By on 3.25.09 | 3:34PM

A 1923 Weimar German bank note in the sum of 50 million marks


In a few years will Americans be using wheelbarrows to carry around enough cash to buy a loaf of bread, as happened in hyperinflation-ravaged Germany in the 1920s?

Probably nein, but we are all going to experience pain as inflation eats away at our paychecks, our 401(k)s, and our bank accounts.

One worrying sign is that investors are less than enthusiastic about buying triple-A rated U.S. government debt.

AP reports this afternoon:

Stocks lost ground after a weak auction of U.S. government debt stirred worries about how easily Washington will be able to raise money to fund its economic rescue program.

Investors gave an unexpectedly cool response to a $24 billion auction of 5-year Treasury notes Wednesday, which also sent prices for Treasurys lower.

The government is running up record deficits in order to fund an array of plans to provide stimulus to the economy and support to the ailing financial system. [emphasis added above]

Investors are justifiably worried about the long-term solvency of the U.S. government which lacks the political will to set its financial house in order. They also worry whether the value of the U.S. dollars that the Obama administration is urging them to buy will be diluted by an orgy of money-printing. Remember that just a month ago Secretary of State Hillary Clinton had to beg the Chinese to keep buying Treasurys.

The fact that investors, including foreign central banks, have just about had their fill of greenbacks should scare the bejeezus out of all Americans.

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