Tuesday, March 31, 2009

Obama is crowding out any chance for growth

Brad Setser says growth in foreign reserves is simply not robust enough to provide demand for the huge increase in debt Mr. Obama wants to lay on our grandchildren.

The obvious implication: most of the 2009 US fiscal deficit will need to be financed domestically. The Fed’s custodial data indicates central banks are still buying Treasuries, though at a somewhat slower pace than in late 2008. But their demand hasn’t kept up with issuance.