And thus it begins:
WASHINGTON (AP) — A record drop in foreign holdings of U.S. Treasury bills in December sent a reminder that the government might have to pay higher interest rates on its debt to continue to attract investors.
Good news: Stronger demand for the dollar (from higher returns and the slow implosion of the euro; more on that later in the week) will make imports cheaper.
Bad news: No one will be able to afford even cheaper imports, because higher rates will choke off the jobless recovery, and continued government borrowing will crowd out private investment.
Badder news: That crowding out effect is the bit that should keep you up nights. When Washington borrows money, it spends it on peanut butter or whatever. It just gets spent and it’s gone. When an investor borrows money, he invests it in future growth — making us all richer. But it’s easier (and in Washington, safer) to bitch about rotten, greedy capitalists and kowtow to the Kowtower-in-Chief.