Source: Forbes.com
Author: Parmy Olson Concept: Bond Issuance, Debt coverage
Brief Synopsis: This article discusses how governments are going to raise most of the money for the bailout by issuing bonds rather than raising taxes. For the most part, investors would be foreign buyers. However, at-home demand is still necessary and somewhat questionable. If demand doesn't cover supply the US will have to lower the price of the bonds, thus creating more debt in the long-run with greater interest rates as a result of lower prices. Basically, fixing one problem could potentially create three more unpredicted problems, including increased taxes in the end.
My Thoughts: I believe it is a good idea to issue bonds to raise money rather than raising taxes, but if this solution is only going to create higher taxes and a greater deficit in the long run, it hardly seems worth the trouble. As much as everybody would hate to see it, I think it would be more beneficial in the long run to raise taxes now, thus getting rid of the potential problems in the future that bonds would create.
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