WORRIES DOWN THE ROAD

To deal with the Big Crunch, many countries will begin aggressive deficit spending and I was wondering where the cash was going to come from if almost everyone starts borrowing at the same time. I still wonder but one consequence is clear: interest rates will rise because of the shortage of capital caused by the financial engineering of the MOTU. (h/t Atrios)

Calculated Risk shares these words from Nouriel Roubini:

The Treasury will be issuing in the next two years about $2 trillion of additional debt ... These policies – however partially necessary – will eventually leads to much higher real interest rates on the public debt and weaken the US dollar once this tsunami of implicit and explicit public liabilities and monetary debt driven by rising twin fiscal and current account deficits will hit a world where the global supply of savings is shrinking – as most countries moves to fiscal deficits thus reducing global savings – and foreign investors start to ponder the long term sustainability of the US domestic and external liabilities.