Tuesday, May 12, 2009

The return of gold?

As the U.S. debt grows, gold seems to be creeping back as an international reserve. See QandO, a blog I know little about.

If inflation starts to creep up, the interest rates will also rise. Servicing the U.S. debt is not a big deal now because interest rates at the short end are near zero. What happens to the interest costs if those interest rates rise to five or six percent?

One of the weaknesses of the Bush administration was that they never planned for what would happen after the military toppled Saddam Hussein. Have the economists in the Obama administration thought about what will happen when interest rates return to normal levels?

No comments: