Government deficits. Foreign sovereign and U.S. federal, state and local deficits should be both sweet and sour for debt markets this year. The liquidity created by all the extra issuance should hit the sweet spot. But if the U.S. and global economies take too long to recover, then governments will face some sour choices: higher taxes, fewer programs, more debt or–a last resort–default. Prediction: issuance and credit concerns should help drive up interest rates in longer-maturity government debt.

Related Posts:

• WSJ — Taking the National Debt Seriously: In 2009 about 40% of income taxes will go towards debt interest payments.
• US faces ‘difficult’ tax choices: Bernanke
• Film Tax Credits Are An Unaffordable Luxury — Josh Barro
• Stocks fall on concern about US credit rating
• Ben Bernanke opinion, WSJ: The Fed’s Exit Strategy

This entry was posted on Monday, January 11th, 2010 at 6:47 pm and is filed under Local and Regional. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.