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The best-looking horse

December 12, 2011

My colleague, Carrie Lane, told me about a quote she heard on NPR last week. I thought it was such a great quote (and point) that I wanted to share it.  

From NPR:

Erskine Bowles, co-chair of the National Commission on Fiscal Responsibility and Reform, had one of the day’s best lines following a brief meeting with reporters after the release of his panel’s final report. 

A reporter asked him (I’m paraphrasing) if the nation’s fiscal condition is so dire, why doesn’t the bond market reflect that by demanding significantly higher interest rates on U.S. Treasury bonds instead of accepting the very low current rates.

“That’s because we’re the best-looking horse in the glue factory,” Bowles said without missing a beat.

 His point? In a world in which Ireland and Greece have gone over the fiscal cliff and Portugal, Spain and Italy are feared to be next, the U.S. looks relatively good. But it’s only relative.

Mr. Bowles is quite correct but he could have made one other point. Our U.S. Treasury rates are low artificially because the Federal Reserve is ensuring that market rates do not prevail and have become the largest purchaser of long term treasuries. How can we seem to endlessly add on to our debt? It is easy when you own the printing machine; you just print new dollars and buy your own debt. This amazing development has received little news coverage.    

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