Reply #9: Agree - Savings equal investment =growth, and Deficits are negative saving [View All]

[papau]

and indeed - Long range interest rates have a range for any given economic level of activity relative to available capital - a lousy economy and you get low interest rates (near zero in Japan) - but the gov deficit forever projections done by those with capital to invest means the 10 year rates will be on the high of that range - so the lousy economy rate will be low, but it will be a higher rate than would be out there if folks did not anticipate higher future government demand for loans from the public due to the deficit.

In effect lower interest rates and lower taxes are a bit contradictory - as lower taxes often lead to higher than they would otherwise be interest rates.

And in any boardroom the fellow selling a capital investment is saying that the investment will return more than just socking the money away in a savings account or bond - it will cover a "hurdle" rate - and that rate consists of the projected 10 year rate based on the current 10 year rate (and this is where Gov Deficit comes in) plus a risk premium that the Board has defined as adequate for new investment in that area of the business.

More gov deficits - and business capital spending will be less than it would otherwise be. It does not mean no business investment spending growth when you have deficits - it does mean you have less than you could have had with a better administration in power.

We must get rid of Bush if we want an economy that is growing as fast as possible.