Will Treasury be able to borrow the massive amount of over-spending?
"Bailouts Threaten Nations' Debt Ratings
THE INCOMING OBAMA ADMINISTRATION got a rude reception from the debt markets.
Ed Yardeni, who coined the term 'bond vigilantes' back in the early 'Eighties, sees them being roused again. Then, the vigilantes' main target was inflation; now it's burgeoning budget deficits around the globe.
The eponymous head of Yardeni Research notes that the Congressional Budget Office is projecting a fiscal 2009 budget deficit of $1.2 trillion -- 8% of U.S. gross domestic product. And that's before President Obama's $800 billion stimulus plan. The CBO also accounts for the discounted present value of the TARP returns, which brings its cost down to $180 billion this year from the likely $700 billion cash outlay.
Taking all that into account, Goldman Sachs estimates that the Treasury's cash borrowing needs may hit $2.5 trillion this year. Against this backdrop, incoming Treasury Secretary Timothy Geithner threw down the gauntlet to America's biggest creditor, China, accusing it of currency manipulation."