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The problem would only arise if the Fed ever sold its holdings back into the private market.
by rootless2 on Sun Jul 10th, 2011 at 11:53:28 AM EST
[ Parent ]
Right, so the situation we're in now is one in which the "debt ceiling" would be a binding constraint if all the Federal debt were in private hands, but since lots of it is in the hands of the Fed it shouldn't count. Except, for people who obsess about the government balance sheet, it does count.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Sun Jul 10th, 2011 at 12:45:24 PM EST
[ Parent ]
in fact, even though I don't think that debt is problem free, the interest rate burden on the US government is historically low so the debt is certainly not an emergency issue.

The point I'm making is that balancing the government books does not have to carry a right wing argument. In fact,the Irish opposition should  be arguing that like any householder who has overextended on a mortgage, the Irish government needs to cut its losses, turn the assets over the the lender and try to make do on a more modest budget. The motivations for jumping up and down and yelling that governments are not like householders are unclear.

by rootless2 on Sun Jul 10th, 2011 at 12:53:50 PM EST
[ Parent ]

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