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→Unsustainability of Obama deficits
=== Unsustainability of Obama deficits ===
=== Unsustainability of Obama deficits ===
The Obama deficits are currently more than half the size of total private savings. Even before President Obama's massive increase in deficits, the national savings rate was insufficient to finance job creation (or "domestic private investment"). To sustain large deficits, the economy would require a combination of more private saving (less consumption), lower investment (less job creation), and higher borrowing from abroad. The unsustainability of deficits tends to be triggered rapidly, as no investor wants to be the one still holding the government debt when eventual default or hyperinflation occurs.
The Obama deficits are currently more than half the size of total private savings. Even before President Obama's massive increase in deficits, the national savings rate was insufficient to finance job creation (or "domestic private investment"). To sustain large deficits, the economy would require a combination of more private saving (less consumption), lower investment (less job creation), and higher borrowing from abroad. The unsustainability of deficits tends to be triggered rapidly, as no investor wants to be the one still holding the government debt when eventual default or hyperinflation occurs.
Foreigners currently hold $4.5 trillion (more than half) of the total privately held government debt. Foreigners are usually less willing to buy and hold government debt because they bear exchange-rate risk. Default or monetization typically leads to currency devaluation and would reduce the debt’s value in foreign currencies. If foreigners were to become less willing to finance the U.S. Government's operations, significantly higher [[interest rate]]s would have to be paid by Americans. Furthermore, if interest rates and the cost of carrying the debt were to rise suddenly, higher debt payments to foreigners would result in a fall in Americans personal income as wealth is transferred abroad.
== History of the Debt Limit ==
== History of the Debt Limit ==