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Billion$ and Billion$ and Billion$ August 27, 2003

Posted by worldspectacle in Uncategorized.

Iraq will need �several tens of billions� of dollars from abroad in the next year to rebuild its rickety infrastructure and revive its moribund economy, and American taxpayers and foreign governments will be asked to contribute substantial sums, U.S. occupation coordinator L. Paul Bremer said yesterday.”

Hint from Miss Monica: as spending for the military increases and taxes on the rich decrease (both substantially), the Federal deficit will increase. As the Federal deficit increases, the U.S. Treasury will issue more debt. In general, a large increase in supply of debt (with demand holding steady, or decreasing if the stock market revives) means that interest rates must rise, in order for U.S. debt to be an attractive investment. This pushes up rates for other debt issuers, who must compete with the U.S. Treasury. As debt interest rates rise, consumer interest rates (mortgages and credit cards) rise. The rate of inflation increases. If the economy remains stagnant, we have a return to the “stagflation” of the 70’s and 80’s.

So *now* would be a good time to pay off the credit card debt and lock in the fixed rate loans. Maybe do some light reading about high-inflation countries, like Argentina, Chile and Israel.



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