Deficit Logic That Will Make Your Head Explode

Keith McCullough Bloomberg

Photo: Bloomberg

Oh the contortions that deficit hawks will go to to explain current events.On Twitter, Keith McCullough argues that the standoff over the debt ceiling is good for the dollar (he says that because the dollar is up today and the debt ceiling is being discussed, ergo correlation!).

But deficit hawks also say that austerity is necessary to be able to keep selling debt and keep interest rates low

But there’s a clear connection between lower interest rates and a weaker dollar, so if it got even easier to sell debt, the dollar should actually weaken.

Oy! The head hurts!

*Also: People who argue there’s some connection between debt and currency strength would be wise to examine Japan.

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