Kent Conrad: “What is stunning here is who is it going to go to? It used to be America financed its own debt; that is, we borrowed the…”

“What is stunning here is who is it going to go to? It used to be America financed its own debt; that is, we borrowed the money from ourselves. Increasingly, we are borrowing the money from abroad. Increasingly, we are dependent on the decisions of foreign central bankers to finance our veracious appetite for foreign capital. The Senator is exactly right. As the debt increases, even if interest rates remained unchanged, the interest cost would go up because of the increasing debt, the increasing borrowing that we are doing as a nation. On top of that, we know the increasing debt will put pressure to increase interest rates because people are going to keep making us these loans, especially when the value of our currency is declining. The only way to offset that is to increase the interest rates. So then you get hit by a double whammy, the double whammy of increased interest because your debt has increased and also it is increased because interest rates are increasing.”