I think we are nearing the point where we won't be able to float debt.

[mslawstudent]

Interest rates seem to be eeking up. The currency doesn't seem to have any bottom in sight. I looked up the numbers and something like a 5% increase in interest rates without corresponding tax revenue increases would by the time of the next fed. debt rollover period increase would mean that the US would need to eliminate all discretionary spending just to get back to the current level of deficit spending this is incredible balance sheet risk.
I'm convinced the US's ability to carry such high levels of debt despite a saving rate of --- and military and healthcare expenditures that far exceed worlwide expeditures as % GNP are based on a near 0 risk premium for us debt.
I read some economic talking head that said if there was risk it would show up in the long bond. But given the level of balance sheet risk I think any risk pricing demanded by those who buy our debt would not be clear until it was too late.
Also if the US begans to command a risk premium that premium should increase parabolically since we have such a large portion of world capital. (ie it'll be like a .5% 1% 3% then 10%) Around 6-7% i believe the FED will have to buy the majority of the deficit as foreign buyers will began to refuse.

How soon and what key indicators do you think will indicate the inability of the Federal government to float debt. (I'm thinking 1.5-2 barring large shocks)

[aquart]

1. Default?

[bullimiami]

2. Unfortunately no one knows where the breaking point will be

Things will go along pretty much as is until it just snaps, too late then.

[Old and In the Way]

3. Payment higher interest on the debt is going to be another hit to

the budget. I doubt they've dialed this into their sunny projections. What a mess.

[elsiesummers]

4. I wonder too - some thoughts:

First agree with above poster (#2?) that we likely wouldn't know until too late.

Some thoughts:

A US economic crash would likely mean a world economic crash. China, as long as pegged to the US and selling to US consumers, is tied to our economic hip. Asian countries may go on buying our debt far longer than we expect - making an eventual correction worse when it comes.

One thing I read is that trends usually go far beyond equilibrium before they correct and return to the long term trend line (think tech bubble overvaluation). Could this also happen with the current account deficit and the yuan not revaluing?

Could the budget deficits go far beyond our expectations?

Another trend to watch: dollar is already considered overvalued against euro by many, yet will probably continue on that dollar devaluation trend past equilibrium.

Wonder if an inflationary economy might produce increased tax revenues, thus reducing deficit? (Just an idea - I suppose inflation could instead stall the economy).

[RainDog]

5. two views, two nobel economists

Prescott - no problem with dollar falling. no problem with deficit. no problem with world economy-

http://www.qa.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=6971633

Akerlof, from 2003 article-

http://www.guardian.co.uk/economicdispatch/story/0,12498,1030321,00.html

loads of links to articles and op-eds that support either side-

http://www.stern.nyu.edu/globalmacro/cur_policy/cad.html

[edhopper]

6. I think that if

the repugs pass this ridiculous Social Security privatization with the need to borrow 2 Trillion dollars the Central Banks will have had enough and let us crash. We now take 80% of the world's savings to support our debt. I don't think they will give us more.

[girl gone mad]

8. and I'll third that...

the SS privatization scheme could be the straw that breaks the camel's back.

[GOPBasher]

7. I've been thinking this for a while.

If this SS plan passes -- and I'm pretty sure it will -- our economy will tumble. Oh well, our nation deserves it.