Because Experience Only Counts When You’re Vice President

Who could have seen this coming?

For the first time since another Democrat occupied the White House, investors from Beijing to Zurich are challenging a president’s attempts to revive the economy with record deficit spending. Fifteen years after forcing Bill Clinton to abandon his own stimulus plans, the so-called bond vigilantes are punishing Barack Obama for quadrupling the budget shortfall to $1.85 trillion. By driving up yields on U.S. debt, they are also threatening to derail Federal Reserve Chairman Ben S. Bernanke’s efforts to cut borrowing costs for businesses and consumers.
The 1.5-percentage-point rise in 10-year Treasury yields this year pushed interest rates on 30-year fixed mortgages to above 5 percent for the first time since before Bernanke announced on March 18 that the central bank would start printing money to buy financial assets. Treasuries have lost 5.1 percent in their worst annual start since Merrill Lynch & Co. began its Treasury Master Index in 1977.
“The bond-market vigilantes are up in arms over the outlook for the federal deficit,” said Edward Yardeni, who coined the term in 1984 to describe investors who protest monetary or fiscal policies they consider inflationary by selling bonds. He now heads Yardeni Research Inc. in Great Neck, New York. “Ten trillion dollars over the next 10 years is just an indication that Washington is really out of control and that there is no fiscal discipline whatsoever.”

Captain Ed;

Right now, the United States has responded to a lack of demand for its Treasuries through a questionable and disturbing method: we’re buying our own debt. That allows the yields to remain low, but buying our own debt is somewhat akin to creating your own credit card. Eventually, you have to acknowledge that the money you create on the books never really existed, unless the United States plans to simply print money to pay off all the bonds. That would create a level of inflation not seen in the West since the Weimar Republic, and will effectively force the rest of the world to avoid U.S. currency and investments as unsound. It would, for the first time in decades, put the United States on the financial sideline.

Meanwhile, over at the Toronto On-Another-Planet, the headline item under “News|World” is titled “Was Bush on a mission from God?”