Debt burden

Here’s something to chew of over the weekend. The United States this week had trouble finding buyers at three separate auctions of Treasury notes worth a combined $118 billion. Now that the European Union is stepping in to stem Greece’s economic crisis, investors seem to be turning their attention to the United States. They’re not impressed with the debt we’re piling up.
Read a Wall Street Journal story on this here. (You will need a subscription to read the entire article.) Read a free account by Cnnmoney.com here.

The lukewarm interest in U.S. Treasurys will naturally lead to increased yields. And since many mortgages are tied to Treasury notes, this will mean higher interest rates. That means more expensive mortgages, which will make it harder to sell houses even as it makes it harder for people with adjustable rate mortgages to keep up.
The Cnnmoney.com piece quotes Mike Larson, an interest rate analyst at Weiss Research.”The message from the bond market to Washington is loud and clear,” he said. “Get your fiscal house in order or we’ll force you to do so.”
Gus Faucher, director of macro economics at Moody’s Economy.com, was a little more upbeat. He said the economy eventually will recover, reducing debt levels. But even he agrees a sudden rise in Treasury yields would hurt the economy.
Personally, I’m not seeing a lot out of Washington that looks as if the nation is preparing for a robust recovery. And before some of you start in, I’ve been consistently critical of budget deficits regardless of which party is in power. The dangers of too much public debt should not be a partisan issue. It really isn’t a matter up for debate.