Thursday, March 10, 2005


Dollar Watch: Japan Contemplates "Diversification"

Higher Interest Rates Coming?

Deficits don't matter. That's the mantra from the GOP. But it's increasing looking like deficits do matter. This week, interest rates on U.S Treasuries spiked above 4.5%, a pshychological barrier they say. More importantly Japan, one of our biggest creditors, folks who buy U.S. Government Bonds that allow us to finance our massive budget deficits, indicated it's looking at diversifying it's bond holdings. So what you say? Well, Japan and China are the ATM's that grease the wheels of the American economy. We buy their stuff and then their governments use the money to buy our bonds, keeping us afloat to buy more of their stuff. Japan backing way from the dollar and U.S Treasuries is not a good thing, if China follows suit, then things could get interesting...think Argentina (although my economist friends seem to think that's a bit dramatic.)

Anyway, let's just keep telling ourselves that "Deficits Don't Matter..."

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