Secondly, The Wall Street Journal
reported today that “Unease at Deficit Hurts Demand for Treasuries.” The
U.S government is beginning to have trouble financing its huge
deficits. Unlike past Treasury auctions over the past few years, the usual
foreign buyers did not show up to finance America’s deficit.

Moody’s warned investors last week that America’s AAA bond rating is in
jeopardy. Have investors begun to heed Moody’s warnings and unofficially downgrade
America’s AAA bond rating?

This is leading to significant increases in interest rates, which will affect the
cost not only of government borrowing, but of consumer and business borrowing
as well. As interest rates increase, consumer and investment spending will
decline and government deficits will continue to expand. This is not the recipe
for stimulating a weak economic recovery.
 
Are ever-increasing government deficits, projected tax increases and increased
interest rates going to stall America’s weak recovery? Is this the beginning of
the second phase of a “W” recession? If so, this will further exacerbate the
government’s deficit financing problems.

Williams can be heard daily on Sirius/XM Power 169 from 9 to 10 p.m.

Visit www.armstrongwilliams.com.

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