No pain, no gain

On our off-day here (we normally publish Monday, Wednesday and Friday) I wanted to follow up on yesterday's post with this recently-posted clip of Fareed Zakaria talking about our inability to make tough choices. I enjoy Zakaria's insights and feel that his recent column, Are America's Best Days Behind Us (Time Magazine, March 3, 2011), was deeply insightful. This short clip is a variation on yesterday's theme that a Strong Town can not rely on federal or state governments.

One other news item that is of related interest is the report that PIMCO, the world's largest bond fund, is now betting against U.S. treasury debt. In yesterday's post I graphed out the yield on the 90-day treasury and pointed out what would happen if yeilds rise. The mechanism by which they rise is when large bondholders like PIMCO (and China, Japan and other foreign governments) decide they don't want to hold our debt. When there are not enough buyers for our debt - and we have a LOT of debt to roll over - then we have to pay a higher interest rate to attract enough buyers. And as we pointed out yesterday, higher interest rates just don't work.

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