Let's focus on the column for 5 yr borrowing. The last entry says 1.45%. Now, let's consider inflation. Looking at a chart for that here (top chart), we'll notice that the market is predicting inflation of 1.75% per year over the next 5 years. Now, subtracting the latter number from the former, the result is negative. This means that it would be a wiser financial bet to borrow money now, and pay it back later. Yet... politicians in Washington are currently wrangling about how to reduce our current borrowing, instead of focusing on the miserable economy and jobs situation. If they had any idea what this chart meant, they'd be spending loads of money on infrastructure and thus stimulating the economy. Remember, kids, when one can borrow at a rate that is lower than inflation, and that person (or entity) has a bunch of spending they'll have to do eventually (ie, infrastructure), they're a moron not to borrow now and pay it back later.
Friday, July 29, 2011
How politicians are acting like they're insane
So, we're back. And just in time. Next Tuesday it appears that the federal government will officially run out of money, and won't (sans an act of congress) have the ability to borrow more. This is problematic, to say the least. To quickly demonstrate the insanity of politicians in Washington these days, let us quickly check in on the yield curve (see right and this post). This is the rate at which the government can borrow money for various lengths of time. You'll notice that rates have been trending down recently (going down the chart); the y axis is the date on which the data was gathered.
Posted by thatch at 6:34 PM